Traders pointed to no one reason but said a morning story on a Russian draft law that would allow the seizure of foreign assets made the rounds on bond and stock desks, as equities selling accelerated. The German DAX fell below its 200-day average, which it has not closed below since early September, and also weighed into a nervous stock market.
Read MoreRussian draft law to allow seizure of foreign assets
Both the Russian news, which traders fear could impact Europe's economy, and uncertainty in China play into the biggest fears of slowing global growth at a time when the U.S. Fed is moving away from stimulus and looking toward higher rates.
Read MoreFed's Fisher: Rate hikes sooner rather than later
Dallas Fed President Richard Fisher reinforced that notion well ahead of the market open Thursday, when he said the Fed could move to raise rates in the spring of 2015. The consensus has been for a hike in June 2015. He also commented on risk taking in junk bonds, which helped trigger selling in high yield ETFs - iShares iBoxx $ High Yield Corporate Bond ETF and SPDR Barclays High Yield ETF.
"Yesterday was just some type of technical bounce. So we came in today and that seems to be facing. There are negative stories circulating," said Michael O'Rourke, chief market strategist at JonesTrading. "Apple's weak. ... It looked like an asset allocation trade yesterday, and now it's the opposite with bonds screaming higher and equities selling off."
The S&P 500 broke below the key 1,976 50-day moving average, which was a major support for the market Wednesday—providing an important pivot point that drove the market higher.
"Twenty percent of Wall Street is out for the holiday. It doesn't take much to move it," said one stock trader. "It's kind of an inverse of what we did yesterday." Many trading desks were lightly staffed due to the Jewish holiday.
The dollar index rose to a four-year high, and its surge is making stock traders increasingly nervous about the impact on profits. The euro traded near a two-year low against the dollar after more dovish talk from European Central Bank President Mario Draghi. Gold reversed some of its early losses, and was trading up slightly at $1,220 per ounce, after dipping close to the key $1,200 level earlier.
Read MoreEuro nears two-year low as dovish Draghi speaks
"I think that's something that earnings expectations are going to have to deal with going forward. I don't think there's a big immediate impact on real trade yet," said Robert Sinche, chief global strategist at Pierpont Securities.
The biggest losers in stocks were technology and industrials, which is impacted by global growth and dollar impact on foreign sales.
Market bellwether Apple tumbled 3.4 percent after issues arose with the iPhone 6 and its latest operating system, and on reports of a new computer bug that could impact its Mac computers.
Read MoreDud five-year auction blamed on Fed uncertainty
Traders are watching the 1 p.m. ET auction of $29 billion in seven-year notes, after Wednesday's disappointing earnings. There are also comments from Atlanta Fed President Dennis Lockhart at 1:30 p.m. ET. Earnings are expected from Nike and Micron after the closing bell.