Stocks fell for a fourth day Tuesday as concerns over a slowdown in China and talks about a bailout for Irish banks combined to push the Dow Jones industrial average to its largest one-day loss since August.
Asian markets started a global sell-off after South Korea's central bank raised interest rates to curb inflation. Shares also fell in Shanghai and Hong Kong as speculation spread that China will take more steps to control the pace of its rapidly-growing economy, which would dampen global demand for industrial goods.
"The fact that China is taking actions to tighten things up over there is having a big ripple effect here," said Bruce Simon, the chief investment officer at Ballentine Partners.
In Brussels, European finance ministers ended a meeting without an agreement to bail out Ireland. However officials there said they're moving ahead with preparations to support the country's troubled banks.
The Dow Jones industrial average fell 178.47, or 1.6 percent, to 11,023.50. It dipped below 11,000 during the day for the first time since Oct. 20. Wal-Mart Stores Inc. and Home Depot Inc. were the only two companies to rise among the 30 stocks that make up the Dow.
The Standard & Poor's 500 index fell 19.41, or 1.6 percent, to 1,178.34. The Nasdaq composite index fell 43.98, or 1.8 percent, to 2,469.84.
All 10 industry groups in the Standard and Poor's 500, the index followed by most professional money managers, fell. Companies in the materials and energy industries lost the most ground. Both groups fell more than 2 percent.
Commodities prices also fell sharply as investors shed riskier assets and anticipated weaker demand for basic materials from China. The dollar jumped 0.9 percent against an index of six other currencies as investors sought safety.
Stock indexes have risen sharply since October following strong corporate earnings reports and the introduction of a $600 billion stimulus plan by the Federal Reserve. Some investors may have taken the global economic concerns as an opportunity to sell.
As Asian countries dealt with excessive economic growth and inflation, European finance ministers discussed a bailout for Ireland's banks in hopes of preventing another crisis of confidence in Europe's financial system. The country has so far refused any outside financial assistance.
A fiscal crisis in Greece resulted in a global swoon in stock prices in May as investors questioned the ability of European nations to protect the value of their shared currency, the euro. Greece had to be bailed out by fellow European nations and the International Monetary Fund.
Ireland's situation is different from Greece's, but their respective debt crises are having similar effects on markets. As new doubts emerge about Europe's ability to keep its financial system sound, investors are abandoning the euro, flocking to the dollar, dumping risky assets like stocks and commodities and sending borrowing rates for countries they see as credit risks soaring.
The yield on 10-year Irish bonds rose to 8.25 percent from 7.94 percent late Monday. Yields rise as bond prices fall. Higher yields are a sign that investors are demanding more money for their willingness to take on the risk of lending to that country. In contrast, the yield on the 10-year U.S. Treasury note edged down to 2.85 percent from 2.95 percent.
Greece fell into a fiscal crisis after runaway spending and a lack of trust from investors as a result of revelations that the government had published faulty budget figures. Ireland is staggering under the costs of nationalizing three banks after that country's real estate boom imploded.
"It's been simmering for a while," Scott Brown, chief economist at Raymond James & Associates, said of the European debt problems. "Now it's coming to a complete boil."
Brown said Ireland is more troublesome for Europe than Greece because more of Ireland's debt is held by major banks, especially in England. A default by Ireland could be another blow to banks that have only recently recovered from the global credit crisis. Shares of British banks HSBC and Barclays PLC both fell 3 percent.
There are also fears that if Ireland needs a bailout, it will spook investors who hold debt from other European countries.
Ireland is a "precursor to Spain," said Quincy Krosby, a market strategist at Prudential Financial. "It's a precursor to Portugal" as well.
Basic materials companies, which have benefited from the booming demand from China, were among the biggest losers in U.S. trading. Freeport-McMoRan Copper & Gold Inc. fell 4.3 percent, Alcoa was off 2.8 percent, and Monsanto Co. was off 2.4 percent.
Commodities prices fell as investors worried that a slowdown in Asia would dampen demand for agricultural products and metals. Agricultural commodities like corn, soybeans and wheat all fell by more than 5 percent. Gold fell 2.2 percent to $1,338.30, while silver fell 3.2 percent to $25.22.
Shares fell overseas. The Stoxx 50 index, which tracks blue chip companies in Europe, fell 2.5 percent. Japan's Nikkei fell 0.3 percent, and China's Shanghai composite index fell 4 percent.
Six stocks fell for every one that rose on the New York Stock Exchange, where consolidated volume came to 5.2 billion shares.