Stocks dropped sharply in early afternoon trading on Thursday, with the Nasdaq down about 2 percent, as investors pulled out of risky assets.

Declines in oil and other commodities accelerated as well. U.S. crude futures slid about 3 percent.

Earlier, Spanish bond yields hit 6.98 percent, their highest level since 1997, at a 10-year auction, while a French bond auction also saw high yields.

The 7 percent mark for bond yields is viewed by investors as unsustainable, as both Greece and Portugal were forced to seek bailouts after yields hit similar levels.

Investors have worried the debt problems could tip the global economy into another recession, which would hurt U.S. growth, even though data here has suggested economy is picking up.

The Dow Jones industrial average <.DJI> dropped 158.63 points, or 1.33 percent, at 11,746.96. The Standard & Poor's 500 Index <.SPX> was down 19.84 points, or 1.60 percent, at 1,217.07, after falling more than 2 percent. The Nasdaq Composite Index <.IXIC> slid 54.21 points, or 2.05 percent, at 2,585.40.

(Reporting by Caroline Valetkevitch; editing by Jeffrey Benkoe)