As of 12:30 p.m. (New York time), the Dow Jones Industrial Average sank nearly 326 points, or about 2.76 percent. Similarly, the S&P 500 index and Nasdaq are each down about 2.5 percent.
Financial-related issues are taking the worst beating in the session.
Bank of America (NYSE: BAC) is down 3.3 percent; JPMorgan Chase (NYSE: JPM) has shed 3 percent, Citigroup (NYSE: C) has tumbled 5.4 percent, Goldman Sachs (GS) has slipped 2.8 percent.
The Dow is now in the loss column for the year, while the other two major indices have slipped about 5 percent year-to-date.
European equity indices have already dropped sharply, with the DAX and CAC-40 falling about 3.4 percent, and the FTSE of the UK shedding 2.6 percent.
Investors are fretting over the failure of the U.S. Congress “super-committee” to act on a budget deal, while new fears are swirling over the finances of France, the second-largest economy in the Eurozone, after Moody’s rating agency warned that Paris’ AAA credit rating is at risk. S&P already downgraded French debt a few months ago.
The election of a new conservative government in Spain also failed to ease market jitters.
Among the few bright spots, drug developer Pharmasset (Nasdaq: VRUS) is surging almost 85 percent after Gilead Sciences (Nasdaq: GILD) agreed to buy it for $11 billion.
Bonds are rising in a safe-haven move as the yield on the 10-year Treasury has dropped to 1.97 percent. Gold futures are down 2.3 percent, while oil futures have fallen by 1.5 percent.