NEW YORK (AP) - There was no let-up in the flight from stocks and bonds as traders reacted to news that the Federal Reserve could end its massive bond-buying program as next year and as China's manufacturing slowed.
The Dow Jones industrial average plunged 353 points, or 2.3 percent, to 14,758 points Thursday.
The Dow has lost 560 points in the past two days, wiping out its gains from May and June. The Standard & Poor's 500 dropped 40 points, or 2.5 percent, to 1,588. The Nasdaq fell 78 points, or 2.3 percent, to 3,364 points.
The price of gold dropped and bond yields rose sharply. Stocks fell across the board. Twenty stocks fell for every one that rose on the New York Stock Exchange. Trading was very heavy at 4.8 billion shares.
Investors are seeing the fallout from yesterday's comments by Fed chairman Ben Bernanke, who said the program of buying bonds to keep interest rates low could be ended next year if the economy keeps improving.
One strategist, Alec Young of S&P Capital IQ, says investors weren't expecting Bernanke to say the program could end so quickly. He says they're adjusting their portfolios in anticipation of higher U.S. interest rates. Young calls it a "pretty significant sea-change in investor strategy."
But some investors say the sell-off in stocks may be overdone -- since the only reason the Fed is considering easing back on its stimulus is because the economy is improving. Gene Goldman, head of research at Cetera Financial Group, says, "People are overreacting a little bit." He says, "It goes back to the fundamentals, the economy is improving."