US stocks plunge more than 2% on Fed, China worries

US stocks plunged on Thursday, continuing a global markets rout spurred by the Federal Reserve's plans to cut stimulus and more bad news in China's manufacturing and banking sectors.

At the closing bell, the Dow Jones Industrial Average was down 353.87 points (2.34 percent) at 14,758.32.

The broad-based S&P 500 fell 40.74 (2.50 percent) to 1,588.19, while the tech-rich Nasdaq Composite tumbled 78.57 (2.28 percent) to 3,364.63.

The US fall followed large drops in Asian and European markets, sparked first by Fed Chairman Ben Bernanke's statement Wednesday that the US central bank could wind up its $85 billion-a-month stimulus program by mid-2014.

Added to that was HSBC's report of a worsening slowdown in Chinese manufacturing, based on its June purchasing managers index, and analysts pointed to a credit crunch in the banking sector as the Chinese central bank tightens the spigot of funding to over-extended lenders.

Shanghai's market fell 2.8 percent and Hong Kong 2.9 percent. In Europe, the main markets lost 3.0 percent or more, with the Euro STOXX 50 index down 3.6 percent.