Dow Skids 3%, Major Averages Lower for 2011

All three major averages fell into negative territory for the year Thursday and are on track to post their steepest loss since May 2010 as investors were rattled over an intensifying global economic slowdown and ahead of the widely-followed monthly unemployment report.

The Dow Jones Industrial Average plunged 411 points during session lows, led by Caterpillar [CAT 91.7606 -4.5194 (-4.69%) ] and IBM [IBM 173.52 -5.31 (-2.97%) ], after rebounding from a deep selloff in the previous session to snap an eight-day losing streak. The blue-chip index bobbed in and out of "correction territory," defined by a drop of 10 percent from its peak from its intraday high in May.

The last time the Dow dropped more than 400 points in a single session was in Dec. 2008.

The S&P 500 and Nasdaq also plummeted. The S&P is also in correction mode. All three major indices are currently trading in negative territory for the year.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, surged more than 25 percent to trade near 30.

“You’re at critical levels here—the Dow has marginally broken through yesterday’s low and the S&P has yet to do that,” Art Cashin, director of floor operations at UBS Financial Services told CNBC. “If they break through noticeably, then we could be in for further selling.”

“The fact that we’re getting the heavy volume indicates that we might be getting some selling from offshore—people who can’t raise money in Europe might be trying to raise it over here,” Cashin said.

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