Stocks tumbled about 2 percent and were on track for a sixth straight day of losses on Wednesday as frustration over the euro zone debt crisis coupled with weak Chinese factory data sank sentiment.
A weak German bond sale sparked fears the debt crisis was even beginning to threaten Berlin, with the leaders of France and Germany still at odds over a longer-term structural solution.
The poor demand for German government bonds showed that investors viewed investing in the euro zone as being too risky.
Debt problems plaguing Europe and the United States have pressured markets, knocking the S&P down more than 7 percent over the last six sessions. World stocks hit their lowest in six weeks on Wednesday.
As the selling across German bunds deepens with investors questioning the safety of its debt, investors are slowly realizing that yields may lurch higher across the spectrum, creating yet another leg lower for sentiment. Such a negative feedback loop was hardly in the cards, said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York.
The Dow Jones industrial average <.DJI> slid 201.88 points, or 1.76 percent, at 11,291.84. The Standard & Poor's 500 Index <.SPX> dropped 21.86 points, or 1.84 percent, at 1,166.18. The Nasdaq Composite Index <.IXIC> took off 51.82 points, or 2.06 percent, at 2,469.46.
All 10 S&P sectors were negative, with financials among the biggest decliners over concerns about exposure to European debt. JPMorgan Chase & Co
Economically sensitive stocks such as energy and commodity-related issues were also lower. The PHLX oil service sector index <.OSX> dropped 3.4 percent and the S&P materials sector <.GSPM> fell 2.3 percent. Schlumberger Ltd
Volume was light ahead of the U.S. Thanksgiving holiday, when markets are closed.
One of the few bright spots, Deere & Co
Adding to market worries, data showed Chinese manufacturing shrank the most in 32 months in November, intensifying concerns about a global economic slowdown. U.S. crude oil fell 1.8 percent on fears of reduced demand from China, the world's No. 2 economy.
U.S. data painted a mixed picture and showed little reason for optimism. New jobless claims rose last week and consumer spending barely increased in October, while another report showed new orders for a range of long-lasting manufactured goods rose.
(Reporting by Angela Moon; editing by Jeffrey Benkoe)