Dow drops more than 700 points on trade fears, posts worst day since Feb. 8

• The Trump administration unveiled tariffs designed to punish China for intellectual property theft, imposing about $60 billion in retaliatory charges.
• Boeing dropped 5.2 percent, while shares of Caterpillar and 3M both closed lower.
• The 30-stock index also briefly entered correction territory for the first time since last month.

U.S. stocks fell sharply on Thursday, pressured by worries of a potential trade war and a decline in tech shares. The broader market was also pressured by a decline in bank stocks.

The Dow Jones industrial average dropped 724.42 points to close at 23,957.89, with Caterpillar, 3M and Boeing as the biggest decliners. The 2.9 percent decline was the worst since Feb. 8.

The 30-stock index also briefly entered correction territory for the first time since last month, falling 10 percent from its 52-week high at one point late in the day.

The S&P 500 fell 2.5 percent to 2,643.69, with seven of 11 sectors — including tech and financials — dropping more than 2 percent. Financials was the worst-performing sector in the index plunging 3.7 percent, its worst day since Feb. 8 when it dropped 4.5 percent. The Nasdaq composite pulled back 2.3 percent to close at 7,166.68.

Selling intensified into the close with the Dow losing more than 250 points in the final hour of trading.

Earlier, the Trump administration unveiled tariffs designed to punish China for intellectual property theft, imposing about $60 billion in retaliatory charges.

Equities have been under pressure recently as the Trump administration ramps up a protectionist trade agenda. Earlier this month, President Donald Trump announced the implementation of tariffs on steel and aluminum imports, raising concerns about a potential trade war.

"Trump's protectionism is making investors nervous," Dario Perkins, managing director of global macro at TS Lombard, said in a note Thursday. "Past experience suggests these policies are flawed, while even moderate trade barriers could disrupt today's complex global supply chains."

Boeing dropped 5.2 percent, while shares of Caterpillar and 3M fell 5.7 percent and 4.7 percent, respectively.

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Traders work on the floor of the New York Stock Exchange (NYSE) moments before the Closing Bell.

On Thursday, the 10-year Treasury yield posted its biggest one-day drop since September of last year as investors bid up bond prices, while gold futures gained 0.5 percent. Treasurys and gold are seen as safer assets to hold than stocks.

Bank stocks, meanwhile, fell along with Treasury yields. The SPDR S&P Bank ETF (KBE) fell 3.7 percent, while Citigroup, J.P. Morgan Chase and Bank of America all closed lower.

The Cboe Volatility index (VIX), widely considered the best gauge of fear in the market, rose above 22.

"You could see more pressure [on stocks] if the trade issue" grows, said Bruce McCain, chief investment strategist at Key Private Bank. "The question is: What is the reality of that happening? Most agree this could hurt the economy."

Losses in tech also helped stocks fall. Tech shares have been under pressure lately amid a sharp decline in Facebook shares. News broke recently that data research firm Cambridge Analytica gathered data from 50 million Facebook profiles without the permission of its users. Shares of Facebook have been under pressure all week, sliding 8.5 percent through Wednesday's close. On Thursday, they fell 2.7 percent.

Facebook CEO Mark Zuckerberg broke his silence over the news, telling CNN it had been "a major breach of trust, and I'm really sorry that this happened."

The news raised concern that U.S. lawmakers could draw up regulation on data usage for Facebook and other major tech companies.

"They're not going to write the regulation just for Facebook, said Shawn Cruz, manager of trader strategy at TD Ameritrade, noting regulators are going to target the entire sector. "That could turn into a headwind for these stocks."

The PowerShares QQQ Trust (QQQ), which tracks the tech-heavy Nasdaq 100 index, dropped 2.5 percent, breaking below its 50-day moving average, a key technical level. Google-parent Alphabet fell 3.6 percent and dipped into correction territory. Tech companies are also among the companies that could be in the cross-hairs of a U.S.-China trade war.

Investors also digested the U.S. Federal Reserve's latest monetary policy decision. As widely expected by the markets, the Fed raised interest rates by 25 basis points on Wednesday and upgraded its economic outlook, saying that economic activity and jobs gains had been strong in recent months.

Market watchers expect the central bank to hike three times in 2018, while the Fed announced that it was increasing its rate-hike forecast for 2019. Stocks closed lower on Wednesday following the announcement.

"In general, the upward momentum in stocks is broken," said Maris Ogg, president at Tower Bridge Advisors. "It had to break. You weren't going to go up in a straight line forever."

"What's happening is the average investor is more attuned to rebalancing and taking profits when their positions get outsized," Ogg said.

—CNBC's Jeff Cox contributed to this report