NEW YORK - A heavy selloff on Wall Street Wednesday cut short a two-day rally and smothered hopes of a sustained turnaround on battered global markets.
There was no clear catalyst for the plunge, which saw the Dow Jones Industrial Average of blue chips sink 2.2 per cent and the Nasdaq Composite lose 3.4 per cent.
The losses came after the weekly US oil stockpiles report showed another surge in fuel stocks, cutting short a rally in crude prices and sending Brent crude below US$30 (S$43) a barrel for the first time since April 2004.
Analysts said the report suggested slow demand growth for energy in the United States, a possible sign of slower economic activity overall.
Supporting that view was the Federal Reserve's Beige Book survey of regional economic conditions, which was somewhat less buoyant than December's, though not at all downbeat.
Michael James at Wedbush Securities said the market was reading economic weakness, and not just excess supply, into the weak crude prices.
" Oil is a key determinant of economic strength," he said. "A majority of traders are using the lack of increased demand for oil as a read-through for global growth in general." The US selloff hit all sectors but utilities. Tech shares fell 2.8 per cent and biotech 5.4 per cent. Amazon sank 5.8 per cent and Twitter 4.8 per cent.
Financials slid 2.6 per cent, with Goldman Sachs down 4.1 per cent; transports were hit with a 3.7 per cent decline despite fuel prices having plunged.
Earlier, European shares pushed mostly higher on an encouraging improvement in Chinese trade data, and despite another 2.4 per cent fall in Shanghai stocks.
China's yuan remained stable for a third straight session, supporting hopes for calming in the country's markets.
The euro was slightly higher on the dollar, at US$1.0874, while the greenback slipped slightly to 117.72 yen (S$1.44). The pound dropped to US$1.4403.
Sheraz Mian, of Zacks Investment Research, sounded a note of caution despite the upbeat China trade data.
"Today's data notwithstanding, China's status as a source of market uncertainty isn't going away anytime soon.
"The country's manufacturing and trade sectors have clearly lost momentum, which has been weighing on overall GDP growth data," he said.
But ratings agency Standard & Poor's said Wednesday it believed concern about China was overplayed, arguing that it saw the outlook for emerging-market countries hit by the collapsing oil prices of greater concern.
"We are much more worried about the prospects for emerging countries outside of China, and in particular raw material-producing countries," S&P economist Jean-Michel Six told reporters in Paris.