Gripped by fear of another recession, the financial markets suffered their worst day Thursday since the crisis of 2008.
The Dow Jones industrial average fell more than 500 points, its ninth-steepest decline ever.
The sell-off wiped out the Dow's gains for 2011. It put the Dow and broader stock indexes into what investors call a correction — down 10 percent from the highs of this spring.
"We are continuing to be bombarded by worries about the global economy," said Bill Stone, the chief investment strategist for PNC Financial.
The day was reminiscent of the wild swings that defined the markets during the crisis three years ago. Gold prices briefly hit a record high, oil fell an extraordinary $5 a barrel, and frightened investors were so desperate to get into some government bonds that they were willing to accept almost no return on their money.
It was the most alarming day yet in the almost uninterrupted selling that has swept Wall Street for two weeks.
Since July 21, the Dow has lost more than 1,300 points, or 10.5 percent of its value. It has closed lower on nine of the 10 trading days since then.
For the day, the Dow closed down 512.76 points, at 11,383.68. It was the steepest point decline since Dec. 1, 2008.
At the close, the Standard & Poor's 500-stock index was down 60.27 points, or 4.78 percent, to 1,200.07. The Nasdaq was down 136.68, or 5.08 percent, to 2,556.39.
Thursday's decline was the ninth-worst ever by points for the Dow. In percentage terms, the decline of 4.3 percent did not rank among the worst. On Black Monday in 1987, for example, the market fell 22 percent.
Japanese and South Korean stocks dropped at the open of Asian trading today, tracking heavy losses in the United States, as investors worried about the global economy and Europe's debt crisis.
The Nikkei Stock Average fell 3.5 percent in the first minutes of trade to 9319.57. Korea's index slumped 4 percent to 1937.17, the lowest since March.
Two weeks ago, investors appeared worried about the deadlocked negotiations in Washington over the debt ceiling. Almost immediately after that crisis was solved, concerns about the economy took over.
Growing fear about the weakening U.S. economy was joined by concern in Europe that the troubled economies of Italy and Spain might need help from the European Union.
The European Union has already given financial assistance to Greece and Ireland, two countries that have struggled to pay their debts. A financial rescue package for Italy or Spain might be more than the group of countries can handle.
Traders also unloaded stocks before today's release of the government's unemployment report for July, which is expected to show only weak job growth and perhaps a rise in the unemployment rate, which is 9.2 percent.
Together, these concerns produced "a perfect storm of selling," said Ryan Larson, head of U.S. equity trading for RBC Global Asset Management.
Not long ago, Wall Street had mostly convinced itself that the U.S. economy would improve in the second half of the year. Gas prices were falling, and Japanese factories were resuming production after disruptions from the March earthquake.
Then one report after another began to show that the economy was much weaker than thought.
Manufacturing is barely growing. The service sector, which covers about 90 percent of the American workforce, is growing at the slowest rate in a year and a half. People spent less in June than in May, the first decline since September 2009.
In an indication of how frightened investors are, Bank of New York Mellon said it will start charging large investors to hold their cash. The bank's clients include pension funds and large investment houses.
Mark Luschini, chief investment strategist for Janney Montgomery Scott, an investment firm in Philadelphia, said his clients see the move from stocks into cash as "a parking lot to sort things out."
"With the scars of 2008 still fresh," he said, "some clients don't want to miss the chance to pre-empt further damage, should it come."
Other market indicators reinforced the risk-averse mood. Gold, which is seen as a safe investment when the stock market is turbulent, set a record price, $1,684.90 an ounce, before falling to finish the day at $1,659. Adjusted for inflation, gold is still far below its record high, reached in 1980.
The sell-off was broad. All 10 industry groups in the Standard & Poor's 500 index fell. Energy companies lost almost 7 percent, materials companies were down 6.6 percent, and industrial companies lost more than 5 percent.
For a time, Kraft Foods was the only stock to rise among the 30 that make up the Dow industrials. Kraft announced Thursday that it will split in two, with one company focusing on snacks and the other on other groceries. But the selling eventually dragged Kraft under, too, and its stock finished down 52 cents, at $33.78.
Steep stock market losses such as the ones of the past two weeks can be self-reinforcing. A drop in stocks erodes household wealth and raises doubts about the economic outlook.
Stock losses take a toll on consumer confidence and make people more reluctant to spend money. Consumer spending makes up 70 percent of economic output in the United States.
Many consumers, their wages devoured by high gasoline and food prices, are pinching pennies: In June, they reduced spending for the first time in 20 months, the government said this week.