Commodity-related stocks drove Wall Street lower on Wednesday as stiff declines in energy and metals prices underscored investor concerns about global economic weakness and Europe's raging debt crisis.

A sharp 7 percent dive in the price of copper, seen as a leading indicator for the economy, rattled investors and led to a drop of 4.5 percent in the S&P materials index. Freeport-McMoRan Copper & Gold Inc fell 7.3 percent to $32.29.

Investors were on a knife edge as inspectors from the EU and IMF headed to Greece to scrutinize austerity plans while German Chancellor Angela Merkel worked to defuse a revolt within her government ahead of a vote to expand Europe's bailout fund on Thursday.

Wednesday's declines put the S&P 500 on course for its worst quarter since the high noon of the financial crisis in the fourth quarter of 2008. The drop also illustrates how sensitive the market has become to news on Europe's troubles.

There is certainly a lot of headline risk and a lot of weak hands that hold stocks after this big rally we've had in the last three days, said Robert Francello, head of equity trading for Apex Capital, a hedge fund in San Francisco.

Traders who have either gotten long during the rally or covered their shorts are probably going just to flatten themselves out, either taking profits or getting out of the market, he said.

Brent crude resumed its downward trend, falling more than $3 in afternoon trade, sending an S&P index of energy stocks down 3 percent. Chevron fell 1.9 percent to $91.74.

News early in the afternoon that bans on short-selling stocks in France, Italy and Spain have been extended highlighted the regulatory risk faced by investors and increased selling pressure.

The Dow Jones industrial average dropped 179.79 points, or 1.61 percent, to 11,010.90. The Standard & Poor's 500 Index dropped 24.32 points, or 2.07 percent, to 1,151.06. The Nasdaq Composite Index dropped 55.25 points, or 2.17 percent, to 2,491.58.

Traders said volume would likely be light and market movements accentuated during the rest of the quarter due to the Jewish New Year holiday of Rosh Hashanah.

So far, the S&P 500 has fallen 12.8 percent this quarter, its worst decline since the fourth quarter of 2008 when it fell 22.6 percent.

In the commodities sector, Cliffs Natural Resources Inc sank 8.4 percent to $55.66. Gold prices fell more than 2 percent.

It's fear of a global slowdown, said Wayne Kaufman, chief market analyst at John Thomas Financial in New York. It's a pure flight to safety into the dollar here, and that's killing commodities.

A push to solidify a euro-zone rescue fund and alleviate the region's sovereign debt crisis lifted stocks on Tuesday for a third consecutive session, following four straight days of losses for the benchmark S&P 500. The S&P gained more than 4 percent over that three-day period. Inc gained 2.5 percent to $229.71 after it unveiled a new tablet computer with a $199 price tag. Apple Inc, which makes the popular iPad tablet, fell 0.6 percent to $397.01.

Microsoft Corp dipped 0.4 percent to $25.58 after Samsung Electronics Co Ltd unveiled software pacts with the company.

In earnings news, Jabil Circuit Inc advanced 8.2 percent to $18.81 a day after reporting fourth-quarter earnings that beat expectations, while Family Dollar Stores Inc fell 1.6 percent to $53.31 after its results.

In economic news, orders for long-lasting U.S. manufactured goods slipped in August on weak demand for motor vehicles, but a rebound in a gauge of business spending suggested the economy would avoid another recession.

About five stocks fell for every one that rose on both the New York Stock Exchange and the Nasdaq. About 7.96 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, in line with this year's average.

(Reporting by Edward Krudy; Additional reporting by Caroline Valetkevitch; Editing by Jan Paschal)