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The S&P 500 hit a more than six-month low on Thursday, closing in negative territory for the year, on concern a deceleration in the Chinese economy would translate into slower global growth.
Consumer stocks led the decline on Wall Street with Disney down 6% after a brokerage downgrade, while Apple fell 2% after a report that overall smartphone sales in China fell in the second quarter.
Lingering concern over the Chinese economy was underscored by a near 8% slide in a major stock index so far this week and after the Commerce Ministry said Wednesday exports could continue falling in coming months.
"The largest issue is certainly the fact that we don't know how much the Chinese economy is slowing," said Art Hogan, chief market strategist at Wunderlich Securities in New York.
"That's manifesting itself in lower oil prices," he said, pointing to the correlation between stocks and crude futures.
U.S. crude edged higher after earlier hitting its lowest since March 2009, while Brent dropped 2.3% to hit its lowest since January.
The 14-day correlation between the S&P 500 and Brent prices is at a five-month high.
The Dow Jones industrial average fell 358.04 points, or 2.06%, to 16,990.69, the S&P 500 lost 43.88 points, or 2.11%, to 2,035.73 and the Nasdaq Composite dropped 141.56 points, or 2.82%, to 4,877.49.
The S&P 500 and Dow posted their largest daily percentage drops since Feb. 3, 2014, while the Nasdaq had its biggest loss since April 10, 2014.
The S&P 500 is now down 1.1% year-to-date. It also traded below its 200-day moving average for the full session, something not seen since last October.
At its session low on Thursday, the S&P 500 was down 4.6% from its record intraday high set in late May.
Disney slumped 6% to $100.02 and Time Warner fell 5% to $73.90, leading a rout in media stocks after a Bernstein downgrade that cited a massive structural upheaval in the industry.
"The pattern didn't change overnight but it got called by Disney for the first time on their earnings," said Hogan.
Disney shares have fallen 17.8% since reporting earnings earlier this month.
Apple fell 2.1% to $112.65 after a Gartner report said China smartphone sales fell for the first time ever on a quarterly basis in the second quarter. Apple counts China as a key growth market.
One bright spot in tech stocks was NetApp , up 3.4% to $30.78 after the data storage equipment maker's results beat expectations.
NYSE declining issues outnumbered advancers 2,612 to 457, for a 5.72-to-1 ratio; on the Nasdaq, 2,396 issues fell and 437 advanced, for a 5.48-to-1 ratio favoring decliners.
The S&P 500 posted 4 new 52-week highs and 40 new lows; the Nasdaq Composite recorded 16 new highs and 208 new lows.
About 7.9 billion shares changed hands on U.S. exchanges, above the 6.7 billion daily average so far this month according to BATS Global Markets data.