Investors looking for a safe place for their money drove up the price of U.S. government debt. The dollar surged against the euro.
Just after noon EDT, the Dow was down 145 points at 13,054, and only four of the 30 stocks in the average were higher. The Dow has had only one triple-digit decline for a trading day this year — March 6, when it fell 204 points.
The Standard & Poor's 500 index was down 17 points at 1,396. Nine of 10 industry groups in the S&P 500 index fell, with financial stocks leading the way, declining 1.8 percent as a group.
The Nasdaq composite index was down 55 at 3,058, on the way to its worst decline of the year. The Nasdaq rallied almost 20 percent in the first three months of the year but was headed for its sixth loss in seven days.
Commodity prices fell sharply. Gold plunged $52, or 3 percent, to $1,620 an ounce. Many investors hold gold as a hedge against a weakening dollar, and the dollar strengthened Wednesday against the euro and the British pound.
The euro fell as low as $1.3106, its lowest point against the dollar in more than two weeks.
Gold doubled in price after the 2008 financial crisis and almost hit $1,900 an ounce, driven partly by fear about the global economy and partly by investors who saw an opportunity to make money from gold's strong rally.
Silver fell 5.5 percent Wednesday, copper fell 3 percent, and crude oil dropped 2.5 percent.
In Spain, bond yields spiked after a disappointing auction of government debt, a signal that investor confidence in Spain's finances is weakening. Spain announced tax increases and budget cuts last week.
European stocks plunged. The benchmark indexes in Germany and France were down almost 3 percent, while Britain's index was off 2.4 percent.
In the United States, minutes from the last meeting of the Federal Reserve showed that members had a sunnier view of the economy because of strong gains in the job market in December, January and February.
But the Fed also signaled that it is unlikely to buy more bonds to help the economy. The Fed has embarked on two rounds of bond-buying in the last several years, most recently in August 2010, to lower interest rates and help stock prices.
"Despite the relatively strong run we've had in the U.S., there's a number of headwinds out there, the main one being Europe, as we can see today with Spain's poor auction," said Bernie Kavanagh, vice president portfolio management at the investment firm Stifel Financial.
Traders sold European bonds and bought safer investments such as German bunds and U.S. Treasurys. The yield on the 10-year Treasury note fell to 2.25 percent from 2.29 percent late Tuesday.
Bank stocks, which typically decline when the European debt crisis flares, dropped sharply. Citigroup dropped almost 4 percent, JPMorgan Chase 2.8 percent and Bank of America 2.6 percent.
The stocks of materials and mining companies fell. Newmont Mining was down 4.3 percent, while Freeport-McMoran Copper fell 2.2 percent. Aluminum maker Alcoa Inc. fell 2.5 percent, one of the biggest declines in the Dow.
In other corporate news:
— Sears Holdings Corp. fell 6.4 percent. The retailer is reportedly planning to sell the casual clothing line Lands' End, which it acquired in 2002.
— SanDisk Corp., which makes memory cards and chips, plunged 9.5 percent, the most in the S&P, after the company cut its forecast for first-quarter revenue because of weaker demand and lower prices.