Stocks tumbled further into the red Thursday, with the Dow industrials plunging more than 500 points, late in trading as nervous investors flocked to the safety of government debt.U.S. Treasuries rallied, with the 10-year note yield hitting a record low. Worries about a slowdown in global growth weighed down commodities, with copper, oil and silver prices sinking.
The selling started early, with world markets logging steep declines, following the Federal Reserve's gloomy outlook and weak manufacturing data from China.
The Dow Jones industrial average tumbled 521.19 points.
The S&P 500 lost 51 points, with only six of its components showing gains. TheNasdaq Composite dropped 116 points.
Financial stocks were among the worst performers in the early going. Shares of Bank of America, JPMorgan Chase, Goldman Sachs, Wells Fargo and Citigroup were down between 2.6 percent to 5.5 percent.
The sell-off came a day after Moody's downgraded Bank of America, Citigroup and Wells Fargo.
U.S. stocks ended sharply lower Wednesday, after the Fed said it will shift $400 billion from short-term Treasuries into long-term Treasuries in an effort to boost lending and spur the economy.
While the so-called Operation Twist was what investors had been anticipating, meeting expectations just wasn't enough.
"These measures can't make the economy worse, but neither, we think, will they make things much better," said High Frequency Economics chief U.S. economist Ian Shepherdson in a note to clients.
As investors fled the global stock markets, they rushed for safer havens, driving up the price on the benchmark 10-year U.S. Treasury. That pushed the yield down to a fresh record low below 1.762 percent from 1.88 percent late Wednesday.
Commodities and currencies: Copper prices fell 7.4 percent, oil skidded 5.1 percent and silver tumbled 8.4 percent. Gold dropped 3.4 percent.
The dollar moved higher against the euro and the British pound, but was slightly lower versus the Japanese yen.
Economy: The Fed's latest assessment of the economy also spooked investors. Though the central bank has been warning of slower growth for months, its signal of "significant downside risks to the economic outlook, including strains in global financial markets" added to the pessimistic forecast.
A preliminary reading on China's manufacturing activity fell in September, according to HSBC's survey, renewing concerns about a sudden slowdown in the world's second-largest economy.
A separate report showed that manufacturing in the eurozone contracted for the first time in over two years, according to London-based Markit Economics.
The reading "provides the strongest sign yet that the region is on the cusp of recession," said Capital Economics European economist Ben May in a research note.
Meanwhile, the U.S. Labor Department issued its weekly jobless claims data ahead of the opening bell. The number of unemployed filing for first time benefits came in at a higher-than-expected 423,000 in the latest week.
The Conference Board's index of leading economic indicators rose 0.3 percent in August, higher than expected, after having climbed 0.5 percent in July.
World markets: European stocks all closed down. Britain's FTSE 100lost 4.7 percent, while France's CAC 40 fell 5.3 percent and the DAX in Germany dropped 5 percent.
Asian markets ended sharply lower. The Shanghai Composite finished 2.8 percent lower, the Hang Seng in Hong Kong plunged 4.9 percent and Japan's Nikkei fell 2.1 percent.
Companies: Shares of Goodrich spiked after United Technologies agreed to buy the aircraft parts maker for $16.5 billion.
Shares of Hewlett-Packard fell as investors anticipated a management shakeup. HP's shares soared almost 7 percent Wednesday on news that the company's board is considering replacing current CEO Leo Apotheker after barely a year on the job with former eBay bossMeg Whitman.
FedEx shares slid after the company lowered its guidance when it reported quarterly results Thursday. The package delivery company cited the slowing global economy and higher fuel prices.
Nike will report results after the close.
