Stocks headed for their biggest drop in more than a month on Thursday as an unsettling outlook from the Federal Reserve and weak data from China stoked global recession fears.

Stocks fell for the fourth straight session in a broad selloff with trading volume heavy, surpassing the daily average roughly 90 minutes before the close. It was a sign investors were fleeing riskier assets with conviction.

The Dow Jones industrial average dropped 404.37 points, or 3.63 percent, to 10,720.47. The Standard & Poor's 500 Index lost 37.28 points, or 3.20 percent, to 1,129.48. The Nasdaq Composite Index slid 82.78 points, or 3.26 percent, to 2,455.41.

Data from China showed once-booming manufacturing contracted for a third consecutive month, while the euro zone's dominant service sector shrank in September for the first in two years, intensifying anxiety about another global setback.

Right now investors realize that on one hand the global economy is slowing and, on the other hand, developed countries, such the United States and Europe, are having growing pains, said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.

As a result, investors are running from stocks into U.S. Treasuries, and that seems to represent the only safe-haven today.

The benchmark S&P briefly dipped below 1,120, seen as a key technical support level which could trigger more selling if broken.

FedEx Corp, considered to be an economic bellwether, slumped 8.9 percent to $66.08 after the world's No. 2 package delivery company pared its outlook for the full year.

The steep declines came on the heels of the previous session's losses, which was sparked by the Fed's statement citing significant downside risks facing the economy.

In addition to the statement on Wednesday, the U.S. central bank detailed additional stimulus measures to help push down long-term rates. Investors worried the latest plan would have little effect on lending and that there appeared to be few solutions to sluggish worldwide demand.

The CBOE Volatility Index, Wall Street's fear gauge, jumped nearly 14 percent, its biggest percentage spike since August 18.

(Reporting by Chuck Mikolajczak, Additional reporting by Caroline Valetkevitch; Editing by Kenneth Barry)

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