Wall Street was on track to post its worst one-day decline in over a year on Thursday as worries about the U.S. economy and the debt crisis in Europe kept investors nervous.
All three indexes fell more than 3 percent at one point, and the S&P 500's drop put it into a correction territory. Decliners beat advancers on the New York Stock Exchange by about 16 to 1.
Analysts predicted further losses ahead, given the degree of pessimism in markets. Bond prices rose sharply as investors sought safety in Treasuries while gold and other commodities sold off.
The debt troubles in Europe, especially with the yields on Italian and Spanish government bonds soaring, are making investors gather as much liquidity as possible, said Stephen Massocca, managing director of Wedbush Morgan in San Francisco.
I would pay more attention to individual valuation of each company. Some companies have gotten ridiculously cheap and that might prompt some people to get into the market, but unless we see the real problems get solved the market is likely to see further declines, he said.
The Dow Jones industrial average was down 345.57 points, or 2.90 percent, at 11,550.87. The Standard & Poor's 500 Index was down 41.31 points, or 3.28 percent, at 1,219.03. The Nasdaq Composite Index was down 93.13 points, or 3.46 percent, at 2,599.94.
The S&P 500's losses since its May 2nd intraday high have now reached more than 10 percent, putting it in correction territory. All three indexes turned negative for 2011.
Stock investors face a number of worries. Congress and the administration must resume their debates over spending cuts to avoid a possible credit downgrade. Evidence of economic weakness has recently increased, raising fear of a return to a recession. A spreading debt crisis in Europe has also threatened to hit the global economy.
Losses occurred in all sectors. Among stocks hitting new 52-week lows were Bank of America, down 4.8 percent at $9.09, Citigroup, down 4.4 percent at $35.61, and Hewlett-Packard, down 3.6 percent at $33.05.
Among individual sectors, losses in energy and materials outpaced others, with the S&P energy down 5 percent and materials down more than 4 percent each. U.S. crude futures fell 5.5 percent to $86.87 a barrel in New York.
The S&P 500 fell for seven straight days before rebounding Wednesday. The CBOE Volatility index jumped 22 percent to its highest since March.
Overseas, the European Central Bank signaled it was buying government bonds in response to a deepening European debt crisis. In Japan, the government intervened in currency markets to stem recent gains in the yen.
On Friday the government releases July's payrolls report, a closely watched number to gauge the U.S. economy.
A series of breaks in technical support suggests further losses, according to market technicians.
It doesn't look good, said John Kosar, director of research at Asbury Research in Chicago. Frankly, you have to look pretty hard to find anything technically that looks constructive.
He sees another 5 percent to 8 percent in losses in the S&P 500 from this point.
(Reporting by Angela Moon, Editing by Kenneth Barry)