NEW YORK (Reuters) - Wall Street stocks slumped 2 percent on Thursday as anxieties about global economic growth smothered a short-lived rally in equity markets around the world that was sparked by speculation the Federal Reserve would not rush interest rate rises.
The dollar gave up some gains from a remarkable three-month run-up and U.S. benchmark bond yields touched one-year lows as investors shrugged off encouraging U.S. jobless data.
"You just look at the global picture, the concerns in Europe, Japan and emerging markets. They're all slowing, and people are leery of equity markets," said Ken Wills, senior corporate dealer at U.S. Forex in Toronto. "So, there's an awful lot of flows piling into the U.S. Treasury market."
Oil prices, deeply affected by the dollar's value, tumbled to a two-year low.
Energy stocks were big losers on Wall Street, where leading indices were off sharply. The MSCI index of world stocks .MIWD00000PUS was off one percent at 406.89.
The Dow Jones industrial average .DJI fell 333.62 points, or 1.96 percent, to 16,660.6, the S&P 500 .SPX lost 40.53 points, or 2.06 percent, to 1,928.36 and the Nasdaq Composite .IXIC dropped 90.26 points, or 2.02 percent, to 4,378.34.
The S&P Energy Index .SPNY was down 3.6 percent on Thursday, a day after investors gave the U.S. stock market its best day of the year as Fed meeting minutes suggested the central bank would not be in a hurry to raise interest rates.
European shares hit a fresh two-month low as German exports fell 5.8 percent in August, the worst decline since January 2009. The data from Europe's biggest economy fed anxieties about recession in the euro zone.
Brent oil fell below $90 a barrel for the first time since mid-2012. Prices have been hurt by a supply glut and concerns about global economic growth and are now down 20 percent from June.
Brent for November delivery LCOc1 was last down $1.70 at $89.68. U.S. November crude CLc1 lost $1.67 to $85.63.
"Supply is strong, inventories are high and demand in Europe is terrible," said Michael Hewson, head analyst at CMC Markets.
The dollar dropped to a three-week low against the yen as investors took profits and pared back bullish bets on the greenback. The dollar was last off 0.30 percent to 107.78 yen.
The Fed minutes showed officials were concerned about the impact of a stronger dollar on the profits of companies with an international presence, and about lackluster global growth, as they sought an eventual exit from record low rates.
The Fed was sending a warning shot to dollar bulls, who had lifted the greenback each week for three months, according to Andrew Wilkinson, chief market analyst at Interactive Brokers LLC in Greenwich, Connecticut.
"The Fed notes that the stronger dollar, which could automatically depress demand for U.S. exports, is already depressing commodity prices that in turn is likely to contain inflationary pressures," Wilkinson told clients.
Spot gold XAU= got a lift from Wall Street's woes and rose for a fourth straight day to its highest since Sept. 23 at $1,233.20 an ounce early on Thursday. It was last trading up 0.3 percent at $1,224.10.
U.S. long-dated and benchmark Treasuries yields hit their lowest levels in over a year.
Yields on 30-year Treasury bonds hit 3.029 percent, their lowest since May 2013, while benchmark 10-year yields hit 2.279 percent, lowest since June 2013.
Benchmark 10-year U.S. Treasury notes US10YT=RR were last off 1/32 in price to yield 2.33 percent. U.S. 30-year Treasury bonds US30YT=RR were last off 7/32 to yield 3.073 percent.
Editing by Chizu Nomiyama