U.S. stocks are suffering a massive sell-off, with the Dow Jones Industrial Average plummeting more than 400 points, in the wake of a grim outlook from the Federal Reserve.

All 30 components of the Dow are in the red. As of 1:25 p.m. EDT Thursday, the Dow fell 3.8 percent, the S&P 500 index fell 3.5 percent, and the Nasdaq slipped 3.3 percent.

"Recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated," the Fed warned on Wednesday. "There are significant downside risks to the economic outlook, including strains in global financial markets."

The Fed also said it will move $400 billion from short-term Treasuries into long-term Treasuries (a form of bond swap) to try to improve lending and stimulate the economy. Investors appeared to be unimpressed by this measure.

High Frequency Economics chief U.S. economist Ian Shepherdson said in a note to clients, "These measures [by the Fed] can't make the economy worse, but neither, we think, will they make things much better.”

Weak manufacturing data from China also depressed investor sentiment.

Not surprisingly, Treasuries are rallying, the yield on the 10-Year note is at 1.76 percent, an all-time low, while commodity prices are getting brutalized on fears of lower global demand.

Oil futures in New York dropped 6.1 percent and gold futures skidded 4.1 percent.

U.S. financial stocks are getting hit particularly hard, one day after credit agency Moody’s downgraded Bank of America, Citigroup and Wells Fargo.

One of the few bright spots in U.S. markets is Goodrich, whose shares surged more than 10 percent after United Technologies agreed to buy the aircraft parts maker for $16.5 billion.

The sell-off in the U.S. follows an overnight bloodbath in Europe. Equity indices in Britain, Germany and France got walloped, plunging between 4.6 percent and 5.3 percent.