US stocks plunge: Dow loses 228 points

A wider-than-expected US trade deficit and a rare trade shortfall in China for February, together with new sovereign downgrades in Europe and turmoil in Saudi Arabia raised investor fears of higher oil prices and slower growth.

The Dow Jones Industrial Average lost 228.48 (1.87 per cent), finishing at 11,984.61, while the broader S&P 500 gave up 24.91 (1.89 per cent) at 1,295.11.

The tech-heavy Nasdaq Composite fell 50.70 (1.84 per cent) to 2,701.02.

"All of the S&P sectors are trading lower, but energy and mining stocks were hit the hardest after Moody's Investors Service cut Spain's credit rating and China reported the biggest monthly trade deficit in seven years," Wells Fargo's Scott Marcouiller said during afternoon trading.

Stocks regained some of their morning losses until early afternoon, when reports of shooting at a demonstration in the volatile Shiite city of Qatif in eastern Saudi Arabia sent the indices plunging again.

Witnesses said three people were injured in the shooting, which came as several hundred minority Shiites marched for the release of Shiite figures arrested by the government.

The shooting, which took place in Saudi Arabia's main oil-producing region, sent crude prices flying more than three dollars a barrel after having drifted lower most of the day.

The Dow's drop to below 12,000 erased its gains since the end of January, but the blue-chip index was still well above the 10,000 level last seen in late August.

Basic materials stocks like mining firms -- whose incomes are often closely tied to Chinese buying -- led the losing sectors. Freeport/McMoran lost 1.36 per cent and Cliffs Natural Resources gave up 7.0 per cent; fertilizer giant Mosaic lost 4.6 per cent.

Energy shares also fell sharply, with ExxonMobil off 3.6 per cent and Chevron losing 3.0 per cent.

General Motors dropped 2.6 percent amid news its chief financial officer, responsible for its successful return to the market, resigned after just over one year in the job. Some analysts said he was disappointed at being passed over for chief executive of the giant automaker.

Starbucks (up 9.9 per cent) and Green Mountain Coffee Roasters (up 18.1 per cent) got a boost from the news that they will join hands to give Starbucks an entry into the booming pod-delivered single-cup coffee market.

Bond prices rose amid the nervousness. The yield for the 10-year Treasury bond fell to 3.39 percent from 3.47 per cent late Wednesday, while the 30-year bond's yield dropped to 4.54 per cent from 4.60 per cent.

Bond prices and yields move in opposite directions.