Financial markets around the world plunged Thursday, a day after the Federal Reserve said it could reduce its aggressive economic stimulus program later this year. A slowdown in Chinese manufacturing heightened worries.
For investors Thursday, there was no place to go.
The global sell-off began in Asia and quickly spread to Europe and then the United States, where the Dow Jones industrial average fell 353 points, wiping out six weeks of gains.
But the damage wasn't just in stocks. Bond prices fell, causing the yield on the benchmark 10-year Treasury note to rise to 2.42 percent, its highest level since August 2011. Oil and gold also slid.
"People are worried about higher interest rates," said Robert Pavlik, chief market strategist at Banyan Partners. "Higher rates have the ability to cut across all sectors of the economy."
The blue-chip Standard & Poor's 500 index is still up 11.4 percent for the year and 135 percent since a recession low in March 2009. But the Dow's drop yesterday -- which knocked the average down 2.3 percent to 14,758.32 -- was its biggest since November 2011. It comes just three weeks after the blue-chip index reached an all-time high of 15,409.
The index has lost 560 points in the past two days, wiping out its gains from May and June.
The Standard & Poor's 500 lost 40.74 points, or 2.5 percent, to 1,588.19. It also reached a record high last month, peaking at 1,669. The Nasdaq composite fell 78.57 points, or 2.3 percent, to 3,364.63.
A Fed policy statement and comments from chairman Ben Bernanke started the selling in stocks and bonds Wednesday.
Bernanke said that the Fed expects to scale back its massive bond-buying program later this year and end it entirely by mid-2014 if the economy continues to improve.
The bank has been buying $85 billion a month in Treasury and mortgage bonds, a program that has made borrowing cheap for consumers and businesses. It has also helped boost the stock market.
Markets were also unnerved Thursday after a slowdown in manufacturing in China worsened this month, reflecting weakening demand. That slowdown added to concerns about growth in the world's second-largest economy.
Before trading began Thursday on Wall Street, Japan's Nikkei index lost 1.7 percent. The FTSE 100 index of leading British shares fell 3 percent while Germany's DAX dropped 3.3 percent.
Gold plunged, leading a rout in commodity prices. Gold dropped $87.80, or 6.4 percent, to $1,286.20 an ounce. Silver fell $1.80, or 8.3 percent, to $19.823 an ounce.
Both are at their lowest since September 2010.
Oil was swept up in the sell-off. Crude oil had its biggest one-day price drop since November, falling $2.84 to finish at $95.40 a barrel in New York.