The stumble in stocks follows a strong start to the year that some investors say had pushed share prices beyond levels justified by corporate fundamentals. The selloff has taken place amid wild swings in individual stocks including GameStop and

AMC Entertainment,

fueled by a battle between day traders and hedge-fund professionals.

“There is some over-excitement in the market,” said

Olaf van den Heuvel,

chief investment officer for

Aegon

Asset Management in the Netherlands, pointing to the surge in GameStop shares as one example. “It was bubble territory.”

Individual stocks remained volatile ahead of the bell in New York. GameStop shares jumped 28%, having rocketed 135% Wednesday. AMC clawed back earlier losses to climb 6.1%, extending Wednesday’s gains of more than 300%.

The slow vaccine rollout and Covid-19 restrictions in major economies have prompted investors to take some money off the table, Mr. van den Heuvel added. He said Aegon would likely view the selloff as a chance to buy risky assets when markets settle down.

Technology stocks dropped ahead of the bell in New York. Shares of Apple fell 2.9% after the iPhone maker reported its most profitable three months on record but didn’t provide specific revenue guidance for the current quarter.

Tesla dropped 6.1% after the electric-vehicle maker—whose shares have soared in recent months—posted its first full-year profit but missed Wall Street’s expectations.

Facebook,

which posted record net income but warned that uncertainty from regulatory probes and ad-targeting limits could create headwinds, fell 0.8% in premarket trading.

In one sign of rising risk aversion, the yield on the benchmark 10-year U.S. Treasury note dropped below 1% for the first time since Jan. 6, before climbing back to 1.008%, according to

Tradeweb.

Bond yields fall as prices rise. Falling yields are often an indicator that investors see the economic outlook weakening.

The dollar strengthened against various currencies including the Australian dollar and the Korean won. The WSJ Dollar Index, which measures the greenback against a basket of other currencies, rose 0.2%.

Comcast,

American Airlines

and

Mastercard

are scheduled to publish results before markets open. Investors will also parse data on jobless claims—due to be published at 8:30 a.m. ET and expected to show that the number of workers seeking benefits declined last week—for fresh clues about how the economy is weathering the pandemic.

The Federal Reserve maintained its easy money policies Wednesday, saying that business activity has softened with the resurgence of Covid-19 cases.

“Any removal of fiscal stimulus any time soon could lead to a falter in the recovery,” said

Mary Nicola,

a portfolio manager for PineBridge Investments.

The selloff in U.S. stocks extended overseas. The pan-continental Stoxx Europe 600 fell 0.7%, led lower by shares of oil-and-gas and financial companies.

Shares in several heavily-shorted European stocks that shot up Wednesday, when the short squeeze spread beyond the U.S., came under pressure. Commercial real-estate firm

Unibail-Rodamco-Westfield

lost 2.4% and German drugmaker

Evotec

fell 4%.

“It is nerve-racking,” said

Remi Olu-Pitan,

a fund manager at Schroders, referring to the big moves in stock prices fueled by day traders swapping tips online. She said the volatility likely induced some professional investors, including those caught with loss-making short positions, to take money off the table, weighing on broader markets.

“You will see more violent pullbacks,” Ms. Olu-Pitan said. “There are parts of the market that are in a bubble.”

Among other individual movers,

Prudential

dropped 7.5% after the insurer said it was weighing an equity offering and would separate off its Jackson National arm in the U.S. Diageo gained 4.8%, as analysts cheered strong first-half sales in North America by the alcohol producer.

Markets broadly retreated in Asia. Hong Kong’s Hang Seng dropped 2.6%, the Shanghai Composite Index fell 1.9% and Japan’s Nikkei 225 declined 1.5%. Container-shipping giant Cosco Shipping led losses in mainland China, sliding 10%.

In a sign of jitters in Chinese markets, money-market rates continued to rise. The one-week Shanghai interbank offered rate rose 0.012 percentage point to 2.981%, its highest since 2015, according to FactSet.

Short-term borrowing costs have risen in recent days as the People’s Bank of China unexpectedly drained funds from the financial system. Earlier this week, a major business newspaper also published remarks by

Ma Jun,

an adviser to the central bank, who warned of asset bubbles emerging due to loose monetary policy.

Tai Hui,

chief Asia market strategist at J.P. Morgan Asset Management, said new pockets of coronavirus outbreaks in China had also dented investor sentiment.

Write to Joe Wallace at Joe.Wallace@wsj.com and Chong Koh Ping at chong.kohping@wsj.com