Wall Street fell 2 percent on Thursday as escalating sovereign debt problems in Europe and a surprise rise in U.S. jobless claims sparked concerns about the health of the global economy.
The selloff was broad-based, but financial, energy and materials sectors were hit hardest as investors dumped stocks considered more risky.
Worries over ability of Greece, Portugal and Spain to pay their debts buoyed the U.S. dollar, which hurt commodity prices denominated in the greenback.
We can't see the kind of confidence we saw a few weeks ago in the market any more. People are looking for more reasons to sell, and they are no longer shaking off the bad news or buying on the dips, said Richard Sparks, senior equities analyst at Schaeffer's Investment Research in Cincinnati, Ohio.
The Dow Jones industrial average <.DJI> was down 215.39 points, or 2.10 percent, at 10,055.16. The Standard & Poor's 500 Index <.SPX> sank 27.43 points, or 2.50 percent, at 1,069.85. The Nasdaq Composite Index <.IXIC> dipped 54.83 points, or 2.50 percent, at 2,136.08.
Spain and Portugal were the latest euro zone countries to worry investors about mounting fiscal deficits after Greece had rattled markets earlier.
An unexpected increase in U.S. weekly initial claims for state unemployment benefits pointed to weakness in the labor market. Employment has been lagging the broader economic recovery.
The CBOE Volatility Index <.VIX>, Wall Street's favorite measure of sentiment, spiked 18.43 percent to 25.57, reflecting investor anxiety.
Aluminum company Alcoa Inc
Also weighing on the financial sector, credit card company MasterCard Inc
Cisco Systems Inc
Shares of CME Group Inc
An S&P index of financial stocks <.GSPF> was down 3.1 percent.
But retailers reported January sales that beat Wall Street's estimates. Department store operator Macy's Inc
Macy's rose 3.7 percent to $16.84, while American Eagle fell 2.3 percent to $16.06. But Target Corp
The specter of rising unemployment before Friday's non-farm payrolls report overshadowed stronger-than-expected factory orders as investors piled into safer assets. U.S. Treasury debt prices rallied.
(Reporting by Angela Moon, Editing by Kenneth Barry)