Stocks tumbled amid concerns that events surrounding Ukraine are escalating and that China's slowing growth will rub off on the global economy and bite into corporate profits.
A sense that tensions are rising around the Ukraine situation sent a shudder through markets. Stocks fell—with the down nearly 200 points and the German DAX down nearly 2 percent.
U.S. Secretary of State John Kerry said a "serious series of steps" would be imposed by the U.S. and Europe on Monday if the referendum in Crimea takes place on Sunday as planned. Russia meanwhile launched new military exercises near its border and reports circulated of shots being fired at aircraft.
(Read more: $3 billion for Ukraine would go straight to...Russia)
"We don't have panic selling here," said one stock trader. "We're getting a lot of panic questions."
Concerns about China are two pronged. A recent report showed that February exports—a major engine for its economy—fell 18.1 percent from a year earlier. There are also worries about the country's financial system, and those concerns intensified last week when Shanghai Chaori Solar defaulted on its debt, the first ever in China.
"It's a little bit of a return of flight to quality. There are headlines about Russia from Kerry and the Ukraine president and just the general sense that things are going to get worse before they improve," said Ian Lyngen, senior Treasury strategist at CRT Capital.
The 10-year yield slumped to 2.66 percent, as buyers moved into Treasurys. The dollar index firmed, and gained further after the euro pulled back after comments from European Central Bank President Mario Draghi that the ECB has been preparing additional stimulus.
"China is a worry but for today it's about a 10 percent worry," said Art Cashin, director of floor operations at UBS. More weak retail and industrial production data from China overnight fed concerns about growth in the world's second biggest economy, and worries increased when news reports circulated later that China was scaling back some business lending by as much as 20 percent.
The Dow temporarily fell through its 50-day moving average of 16,159, and was trading down nearly 200 points in afternoon trading. The S&P 500 was at 1,851, trading in a key support area.
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Copper fell another 1.5 percent Thursday. Since copper is used for collateral for Chinese bank loans, the concern is that more of the metal could flood the market if there are further defaults.
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—By CNBC's Patti Domm. Follow her on Twitter @pattidomm.