U.S. stocks were lower on Thursday, but off their session lows, as market volatility in China and a relentless slide in oil prices unnerved investors, already jittery after a shaky start to the year.
China allowed the biggest fall in the yuan in five months, and Shanghai stocks were halted for the second time this week after another brutal selloff tripped a new circuit breaker.
Global stocks, however, trimmed losses after the Shanghai and Shenzhen stock exchanges said China would suspend the circuit breaker as of Friday. The mechanism has been in place the start of this year.
With Beijing accelerating the yuan's depreciation to make its exports more competitive, investors fear China's economy is even weaker than had been imagined.
Adding to the gloom, oil slipped below $33 a barrel to near 12-year lows due before regaining some ground. Still, oil prices are down about 70 percent since mid-2014.
"There is a wall of worry under full construction brought on by China, fall in oil prices and uncertainty regarding quarterly earnings," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis.
"There is concern regarding China's ability to manage its economy and while the Fed removed one uncertainty when it raised rates last year, it introduced another with regard to the pace of hikes," he said.
Richmond Federal Reserve President Jeffrey Lacker set a hawkish tone on Thursday, saying the central bank may need to raise interest rates more than four times this year if oil prices stabilize, the dollar stops appreciating and inflation surges toward the U.S. central bank's 2 percent target.
However, fed funds futures contracts show that traders expect the Fed to raise rates at least twice in 2016, and are reducing bets on a third hike by December.
At 10:47 a.m. ET (1546 GMT), the Dow Jones industrial average was down 142.21 points, or 0.84 percent, at 16,764.3, the S&P 500 was down 19.47 points, or 0.98 percent, at 1,970.79 and the Nasdaq Composite index was down 67.34 points, or 1.39 percent, at 4,768.43.
Billionaire investor George Soros, speaking at an economic forum in Sri Lanka, drew similarities between the present environment and the financial crash of 2008.
He said global markets are facing a crisis and investors need to be very cautious, Bloomberg reported.
The World Bank also cut its global economic growth forecast for 2016, saying the weak performance of major emerging market economies will tamp activity overall, as will anemic showings from developed countries such as the United States.
All 10 major S&P 500 sectors were lower with the industrials index's 1.4 percent fall leading the decliners.
The CBOE Volatility Index, the market's favored gauge of Wall Street anxiety, was up 9.8 percent at 22.66, after opening at its highest level since Dec. 14.
Data showed the number of Americans filing for unemployment benefits fell last week from a more than five-month high. The report comes ahead of the government's closely watched monthly employment report due for release on Friday.
Shares of Apple were down 1.3 percent at $99.36, following reports of slowing shipments of the iPhone 6S and 6S Plus.
Yahoo fell 3.8 percent to $30.96 after Business Insider reported the company was working on a plan to cut its workforce by at least 10 percent. Alibaba, in which Yahoo has a stake, was down 4.1 percent at $74.16.
Declining issues outnumbered advancing ones on the NYSE by 2,498 to 456. On the Nasdaq, 2,236 issues fell and 434 advanced.
The S&P 500 index showed 1 new 52-week high and 71 new lows, while the Nasdaq recorded 12 new highs and 200 new lows.
(Reporting by Tanya Agrawal; Editing by Saumyadeb Chakrabarty)
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First Published On : Jan 7, 2016 23:15 IST