World market's plunge suggests deepening worry about recession

Stocks plunged, extending a selloff to four days, as policymakers' failure to arrest global economic stagnation sent markets spiraling downward.

The heavy volume of Thursday's plunge signaled investors are selling in anticipation of more losses. Wall Street's "fear gauge," the CBOE Volatility Index, jumped 12 percent, giving the index its biggest 2-day percentage spike in a month as investors protected against more losses to come. 

Energy and materials shares were among the hardest hit areas on worries of slowing worldwide demand. Signs of a slowdown in China fed those fears.

"It's tough to find anything that is a positive catalyst for the market, either domestically or internationally," said TD Ameritrade Chief Derivatives Strategist J.J. Kinahan. 

The Dow Jones industrial average dropped 391.01 points, or 3.51 percent, to 10,733.83. The Standard & Poor's 500 Index lost 37.20 points, or 3.19 percent, to 1,129.56. The Nasdaq Composite Index slid 82.52 points, or 3.25 percent, to 2,455.67.

Weak data from China followed an unsettling outlook about the US economy from the Federal Reserve on Wednesday in stoking recession fears. The previous session's losses were sparked after the Fed said it saw "significant downside risks" facing the economy. 

China's once-booming manufacturing sector contracted for a third consecutive month, while the euro zone's dominant service sector shrank in September for the first time in two years.

Those searching for positive market signs could point to the benchmark S&P 500 index holding above 1,120, seen as a key technical support level which could trigger more selling if broken. 

"We haven't seen the market completely tilt just yet, so that does show there is some resilience. There is some fresh capital on the sideline and people aren't necessarily hitting the panic button," said Joseph Greco, managing director at Meridian Equity Partners in New York.

"If we tested 1,100 -- that is where we could see a really sharp decline from there." 

Volume of about 13.03 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq was well above the daily average of 7.8 billion.

US crude oil futures tumbled more than 6 percent, the biggest one-day percentage drop in six weeks.

European stocks tumbled on Friday and snapped their four-day rally after data showed US employment growth ground to a halt in August, rekindling fears that the world's largest economy is slipping into recession.

The FTSEurofirst 300 .FTEU3 index of top European shares unofficially ended 2.5 percent lower at 948.63 points, while German Bund futures FGBLc1 rallied to record highs.