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Stock market jitters have been set off by uncertainties in some global economies and the pending end of the US Federal Reserve's quantitative easing programme.
The S&P 500 on Thursday posted its largest percentage decline in six months, on concerns about the strength of the global economy and its effect on US corporate earnings.
The slide dragged the benchmark S&P 500 to below its 150-day moving average for the first time since November 2012.
Craigs Investment Partners broker Chris Timms said the Thursday decline in US stocks ''erased all, and more'' of the previous day's rally, as investors bypassed US corporate earnings results and economic reports, to instead focus on global concerns, including Europe's softening economy.
The Dow Jones industrial average ended down 334.97 points, or 1.97%, at 16,659.25; the S&P 500 dropped 40.68, or 2.07%, to 1928.21; and the Nasdaq Composite fell 90.26, or 2.02%, to 4378.34.
Mr Timms' said the initial excitment over ''dovish'' Federal Reserve minutes faded in Europe, because of lingering concerns over Germany's weakening economic data.
Earlier this week, AFP reported the Organisation for Economic Co-operation and Development had indicated the outlook for growth in the euro zone was weak, particularly in Germany, while its index of leading economic indicators pointed to stable growth elsewhere.
Market participants said the end of the Federal Reserve's third round of quantitative easing this month also promoted cautious sentiment as it removed one of the pillars of the five-year bull market.
Chief market strategist at JonesTrading in Greenwich, Connecticut, Michael O'Rourke said ''QE3 ending is one positive catalyst taken away, a tailwind turning into a headwind''.
Wednesday's signal of gloom for the euro zone came the day after the International Monetary Fund lowered its forecast for growth in the 18-member single-currency area.
''In Europe, signs are emerging of a loss of growth momentum in the euro area,'' the OECD said.
Its latest ''composite leading indicators'', which it calculates monthly to show trends in economic activity, point to a slowdown in Germany and Italy, with France stable.
On Tuesday, the IMF sharply cut its euro zone growth forecast to 0.8% and warned the single-currency bloc faced a long period of sluggish activity and dangerously low inflation which the European Central Bank must tackle.
And earlier this week, Germany reported a 5.7% slump in August factory orders and a 4% drop in industrial output, which analysts said meant there would likely be little rebound from the 0.2% contraction posted in the second quarter.