Major indexes dropped more than 1 percent, including the Dow Jones industrials, which tumbled 130 points.
Investors showed little deference to a new report on weekly unemployment claims that was in line with expectations.
The Labor Department said the number of newly laid off workers seeking unemployment benefits for the first time was unchanged last week at 505,000, matching economists' expectations.
Unemployment has been one of the market's biggest ongoing concerns. Consumers worried about their jobs have cut back on spending, which has slowed the recovery. Investors are looking for any signs that shoppers are more likely to start spending again, especially as the crucial holiday shopping season approaches.
A report on leading economic indicators due out at 10 a.m. EST could provide stronger signs of a potential recovery.
The market's early slide follows a slight dip in stocks on Wednesday and heavy selling of shares overseas.
Asian markets fell amid fresh worries about the financial sector as Japan's biggest bank, Mitsubishi UFJ Financial Group, said it plans to raise $11.2 billion to shore up its balance sheet. European markets were also lower.
As markets overseas fell, the dollar rose, hurting commodities and energy and materials stocks.
The Dow fell 130.67, or 1.3 percent, to 10,295.64. The Standard & Poor's 500 index fell 16.74, or 1.5 percent, to 1,093.06, while the Nasdaq composite index fell 36.63, or 1.7 percent, to 2,156.51.
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