Eleven days before the US election, Wall Street had been comfortably in positive territory prior to the news that Federal Bureau of Investigation head James Comey was restarting the probe into Clinton's use of a private email server while serving as secretary of state.
Clinton, the Democratic nominee, has been the market's preferred choice over Republican Donald Trump, viewed by many investors as unpredictable. Analysts said the development raises the chances of a Trump win, after weeks during which Clinton handily led the polls.
"One of the things we felt more certain about over the course of the last week or two has been the result at the top of the ballot, and this probably throws that into question," said Art Hogan, chief market strategist at Wunderlich Securities.
"That's not going to be good for markets."
And Chris Low of FTN Financial, said the news "at the very least it is going to require some new thinking" ahead of the November 8 presidential elections, leaving little time for the FBI to resolve the matter.
"I think that is what is motivating people to sell because it just creates a huge amount of uncertainty."
The dollar plunged against all the major currencies after the FBI announcement, but regained some territory before the close. The Mexican peso sank against the dollar but also later rebounded slightly.
Troubled OPEC talks hit oil
Meanwhile oil prices were hit with a double whammy of the FBI news and uncertainty over OPEC's ability to negotiate production limits and win the cooperation of non-cartel producers.
The Brent price dropped back below $50 as talks in Vienna failed to work out details of the tentative deal reached last month, although they are expected to continue over the weekend.
"We've got some news out of OPEC and things are still very complicating and it sounds like the agreement to come to some sort of freeze or cut is likely not going to happen," said Oliver Sloup of iiTrader.com.
European markets wobbled ahead of a raft of data and policy decisions in the week ahead.
Frankfurt, London and Paris diverged, while in Asia, Hong Kong and Shanghai ended just down and Tokyo up marginally.
The Bank of Japan and the Reserve Bank of Australia will deliver their latest interest rate calls Tuesday, followed by the US Federal Reserve Wednesday and the Bank of England Thursday.
The eurozone releases third quarter GDP Monday, and the US releases the critical October jobs report Friday.
Key figures at 2100 GMT
New York - Dow: DOWN 0.2 percent to 18,161.19 (close)
New York - S&P 500: DOWN 0.1 percent to 2,126.41 (close)
New York - Nasdaq: DOWN 0.5 percent to 5,190.10 (close)
London - FTSE 100: UP 0.1 percent at 6,996.26 points (close)
Frankfurt - DAX 30: DOWN 0.2 percent at 10,696.19 (close)
Paris - CAC 40: UP 0.3 percent at 4,548.58 (close)
EURO STOXX 50: DOWN 0.2 percent to 3,079.24 (close)
Tokyo - Nikkei 225: UP 0.6 percent at 17,446.41 (close)
Hong Kong - Hang Seng: DOWN 0.8 percent at 22,954.81 (close)
Shanghai - Composite: DOWN 0.3 percent at 3,104.27 (close)
Euro/dollar: UP to $1.0987 from $1.0898 Thursday
Dollar/yen: DOWN to 104.73 yen from 105.20 yen
Pound/dollar: UP to $1.2187 from $1.2166
Euro/pound: UP to 90.16 pence from 89.57 pence
Oil - West Texas Intermediate: DOWN $1.02 to $48.70 per barrel
Oil - Brent North Sea: DOWN 76 cents at $49.71
