U.S. stocks tumbled to two-month lows Wednesday as fears about China's economy slowing down led to more widespread selling. The price of oil plunged to its lowest level since 2008 on the prospect that global demand could fall further.
For the second time in three days, markets slumped on concerns that the second-largest economy in the world is stumbling. A monthly survey of China's service industries slipped to a 17-month low. That helped knock the price of oil lower, since China is a major consumer of energy.
Global markets were also rattled after North Korea said it had conducted its first successful test of a hydrogen bomb. Experts in South Korea and the U.S. doubted that the country had made that breakthrough, but the announcement still caused alarm.
The Dow Jones industrial average dropped 252.15 points, or 1.5%, to 16,906.51. The Standard & Poor's 500 index lost 26.45 points, or 1.3%, to 1,990.26, for its fourth loss in five days. The Nasdaq composite gave up 55.67 points, or 1.1%, to 4,835.76.
U.S. benchmark crude sank $2, or 5.6%, to close at $33.97 a barrel in New York, its lowest price since December 2008. Brent crude, a benchmark for international oils, fell $2.19, or 6%, to close at $34.23 a barrel in London.
Southwestern Energy fell 96 cents, or 12.6%, to $6.69, and Marathon Oil declined $1.48, or 11.6%, to $11.28.
France's CAC 40 shed 1.3%, and Germany's DAX dropped 0.9%. Britain's FTSE 100 fell 1%. Japan's Nikkei 225 index lost 1%, and South Korea's Kospi fell 0.3%. Hong Kong's Hang Seng shed 1%. The Shanghai Composite Index in mainland China rebounded 2.3% as the Chinese government said it would keep some market-stabilizing measures in place.
Stocks had plunged Monday on signs of weakness in China's manufacturing sector. The Shanghai Composite skidded almost 7% that day and also fell Tuesday.
Scott Wren, senior global equity strategist for the Wells Fargo Investment Institute, said the market was overreacting to the latest signs of weakness in China.
"Stocks are not trading on fundamentals," he said. "They're trading on fear that Chinese growth is going to collapse and that these lower oil prices are going to lead to a growing number of defaults in the high-yield bond market."
U.S. government bond prices rose Wednesday as the turbulent stock market made bonds more appealing. The yield on the 10-year Treasury note fell to 2.17% from 2.24%.
The markets have endured a rough few days to start 2016. J.J. Kinahan, chief markets strategist for TD Ameritrade, said that's making bonds attractive.
"Bonds have been up a lot this year even though the interest rates are nothing to be excited about," he said. Investors "want the security of knowing that their money is safe."
Other energy prices also slipped. The price of wholesale gasoline sank 9.5 cents, or 7.6%, to $1.162 a gallon after the U.S. government said inventories of gas climbed by 10.6 million barrels last week. Citi Investment Research analyst Edward Morse said that was the biggest weekly increase since 1993.
Heating oil sank 4.5 cents, or 4%, to $1.081 a gallon. Natural gas declined 5.6 cents, or 2.5%, to $2.267 per 1,000 cubic feet.
Auto retailer AutoNation said it had to offer large discounts in December, especially on luxury vehicles. The company said it will report smaller profits per vehicle in the fourth quarter. The stock dropped $5.98, or 10.5%, to $50.76.
Netflix made the biggest gain in the S&P 500. The streaming video service announced at an electronics show in Las Vegas that it would debut in 130 countries Wednesday, with the notable exception of China. Its shares rose $10.02, or 9.3%, to $117.68.
Chipotle Mexican Grill said it received a federal grand jury subpoena as the government looks into norovirus outbreak at a California restaurant this summer. Chipotle also disclosed that sales at restaurants open at least one year plunged 30% in December in the wake of an E. coli outbreak that affected dozens of restaurants and a norovirus outbreak in one location in Massachusetts. The stock lost $22.36, or 5%, to $426.67. Chipotle has fallen 40% since the outbreaks began in October.
The euro edged up to $1.0788 from $1.0744. The dollar fell to 118.38 yen from 118.97 yen late Tuesday.
The price of gold rose $13.50, or 1.3%, to $1,091.90 an ounce. Silver inched up 0.5 cents to $13.976 an ounce. Copper slid 0.8 cents to $2.088 a pound.