U.S. stocks turned negative for the year on Wednesday as softer Chinese factory data and a weaker outlook from the Federal Reserve increased worries about the recovery and sparked a selloff.

The benchmark S&P 500 index was on track for its biggest daily percentage drop since July 16, with only a handful of stocks positive. All ten major S&P sectors were down more than 1 percent, with the two biggest declining sectors industrials <.GSPI> down 3.5 percent and financials <.GSPF> off 3.4 percent.

The CBOE Volatility Index <.VIX> surged 12 percent, suggesting investors see further choppiness in the market.

China reported a slowdown in factory output a day after the Federal Reserve downgraded its outlook on the U.S. economy and said it would take new steps to offset a weak recovery.

The Fed's comments create worries about what the future holds for the economy, and you're seeing that get played out in more cyclical sectors like industrials and financials, said Robert Pavlik, chief market strategist at Banyan Partners LLC in New York.

The Fed highlighted growth worries and signaled it would do more to support the economy if necessary, though some questioned how effective these measures would be.

Adding liquidity to the system by saying they would buy Treasuries isn't helping the average man on the street, said Pavlik. This isn't going to be creating jobs or helping the housing market.

The Dow Jones industrial average <.DJI> was down 229.77 points, or 2.16 percent, at 10,414.48. The Standard & Poor's 500 Index <.SPX> was down 28.18 points, or 2.51 percent, at 1,092.88. The Nasdaq Composite Index <.IXIC> was down 63.75 points, or 2.80 percent, at 2,213.42.

The three major indexes once again turned negative for the year. The Nasdaq was down 2.7 percent for the year, while the S&P 500 was down 2.1 percent and the Dow was down 0.2 percent.

An economic slowdown in China would affect global business and jobs.

If China's economy slows down, industries worldwide will likely feel it in their revenue. That could darken the jobs picture in this country even further than it already is, said Keith Bliss, senior vice president at Cuttone & Co in New York.

Among the Nasdaq's top decliners was Cisco Systems Inc , which is due to report earnings after the bell. The stock slumped 2.6 percent to $23.67.

Semiconductor company Cree Inc fell 13.5 percent to $59.64 a day after it gave a revenue outlook for the current quarter below analyst estimates.

In what some chartists see as a sell signal, the S&P 500's moving average convergence-divergence or MACD line dipped below its signal line. At the same time, momentum dropped to just below its zero line, strengthening the bearish alert.

Near-term support is found at 1,088, the July 30, intraday low, and then at 1,057, the July 20 low.

(Reporting by Ryan Vlastelica; Editing by Kenneth Barry)

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