(Bloomberg) -- U.S. stocks extended their three-month lows, with the Dow down more than 180 points, amid a China-led rout that continued to engulf equities around the globe.

Technology and industrial companies paced the early retreat, with Microsoft and General Electric falling more than 2.1%. Apple sank for a third day, down 1.6%, while Amazon.com and Facebook slid more than 1.4%. Energy companies in the S&P 500 dropped 1.3% to a four-year low.

The S&P 500 slid 1.3% to 1,965.31 at 10:26 a.m. in New York, on track for its lowest level since Oct. 2. The Dow lost 189.49 points, or 1.1%, to 16,717.02 after yesterday capping its worst three-day start to a year since 2008. The Nasdaq dropped 1.7%. Trading in S&P 500 shares was 48% above the 30- day average for this time of day, while a measure of volatility surged toward a four-week high.


Equity markets worldwide tumbled after Chinese stock exchanges closed less than a half hour after opening, as a more than 7% plunge triggered a market-wide halt for the second time this week. European stocks tumbled as much as 3.6%.

"China devaluing its currency sparks concern that the global growth engine is starting to slow and that creates a dump of any high-flying stocks or anything people perceive as risk," said Yousef Abbasi, a market strategist at JonesTrading Institutional Services in New York. "When you start to worry about growth, you have crude oil down and it all ties together. It's the new year and people are scratching their heads, they're not quite ready to buy the dip."

A flight from risky assets in the first week of the new year has wiped more than $2.5 trillion from global equities, made worse by China's central bank cutting its yuan reference rate for an eighth straight day. China's tolerance for a weaker yuan is being seen as evidence policy makers are struggling to revive an economy that's the world's biggest consumer of energy, metals and grains.

The move revived the angst that sent financial markets into turmoil last summer, driving U.S. stocks to three-month lows yesterday in a selloff led by commodity producers. Comments by billionaire George Soros exacerbated market jitters after he told an economic forum in Sri Lanka today that global markets are facing a crisis and investors need to be very cautious.

'MARKET HAS BEEN IN DENIAL'

Commodity shares remained weak, with copper producer Freeport-McMoRan and Alcoa down at least 3.3%. West Texas Intermediate crude futures slumped 1.8%, after briefly falling below $33 a barrel. Chevron lost 2.3% after the shares slid 4% Wednesday, the steepest since August.

A weaker yuan would support China's flagging export sector, but it also boosts risks for the nation's foreign-currency borrowers, and heightens speculation that the slowdown in Asia's biggest economy is deeper than official data suggest.

While investors cope with the turbulence sparked by China, another source of consternation is looming as the corporate earnings season for 2015's final quarter soon begins. Alcoa, JPMorgan Chase and Intel are scheduled to report results next week. Analysts forecast profits for companies in the S&P 500 fell 6.1% last quarter.

"The market has been in denial," said Michael Ingram, a market strategist at BGC Partners in London. "The broader issue is that growth dynamics are weak pretty much everywhere. Make no mistake, what happens in China this year will shape the market dynamic for the next five."

The Chicago Board Options Exchange Volatility Index rose 12% to 23.06, on track for its highest since Dec. 11. The measure of market turbulence known as the VIX is up 26% so far this month, which would be the most since a record- setting 135% jump in August.

The S&P 500 has fallen 5.3% since Federal Reserve raised interest rates for the first time in nearly a decade. The poor start to 2016 has left the benchmark index 7.8% below its all-time high set in May after coming within 1% of the record as recently as November.

Fed Bank of Richmond President Jeffrey Lacker reiterated in a speech this morning that the pace of interest-rate increases is expected to be gradual, but dependent on the economic outlook. He also expressed confidence inflation will move back to the Fed's 2% goal "over the near term." Chicago Fed President Charles Evans also due to deliver remarks on the outlook this afternoon.

A report today showed fewer Americans filed applications for unemployment benefits last week, a sign the U.S. labor market remained robust entering 2016. The government's December jobs report is due tomorrow, with economists surveyed by Bloomberg forecasting a 200,000 gain and the unemployment rate holding at 5%.

With assistance from Jeff Sutherland, Nao Sano and Adam Haigh.

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