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NEW YORK (Reuters) - U.S. stocks tumbled on Wednesday to their lowest close since September and oil prices gave up an early rally on mounting worries about the global economy.
Major U.S. stock indexes finished down more than 2 percent, with the Nasdaq off more than 3 percent. The S&P 500 ended a two-day rebound, closing below 1,900 for the first time since September.
"There is a fear that the global economy and the U.S. economy as well could lapse into a recession given the fall in energy prices and greater economic weakness overseas," said Tim Ghriskey, chief investment officer of Solaris Asset Management in New York.
Benchmark Brent crude slipped below $30 a barrel, a day after U.S. oil prices breached that level.
Volatility in oil prices overshadowed better-than-feared trade data out of China that initially lifted sentiment in equities and commodities.
Benchmark 10-year U.S. Treasury note yields fell to their lowest levels since late October as investors piled into safe-haven government debt.
The deepening slide in oil and concerns about China's economy have rattled equity markets, which have failed to sustain any significant rallies in early 2016.
"You have a lack of liquidity and incredibly negative sentiment out there," said Michael Holland, chairman of investment company Holland & Co in New York.
"The rallies don’t seem to last very long and that gives people even more concern about the market" despite oversold conditions that seem poised to support a positive run, Holland said. "So fear feeds on fear."
The Dow Jones industrial average fell 364.81 points, or 2.21 percent, to 16,151.41, the S&P 500 lost 48.4 points, or 2.5 percent, to 1,890.28 and the Nasdaq Composite dropped 159.85 points, or 3.41 percent, to 4,526.07.
Investors, who have been hoping that stocks were primed to bounce because of the market's oversold conditions, are looking for confidence from the fourth-quarter earnings season set to begin in earnest later this week with major banks reporting.
The pan-European FTSEurofirst 300 index closed up 0.4 percent, well off its highs.
Though undercut by the reversal in oil prices, European shares were helped by a rise in Dutch insurer Aegon following a business update.
MSCI's broadest gauge of stocks globally fell 0.9 percent.
Concern about a supply glut has helped drag down oil prices to around 12-year lows.
U.S. crude prices settled up 0.1 percent at $30.48 a barrel, paring earlier gains. Benchmark Brent settled down 1.8 percent at $30.31 a barrel, after falling to $29.96.
Data showing crude inventories rose 234,000 barrels last week, much less than expectations, was overshadowed by reported builds of 8.4 million barrels in gasoline and over 6 million in distillates, which includes diesel and heating oil.
"Overall, it's a bearish report. I think today's inventory report is all about products ... The long-awaited massive decline in crude production is not starting again," said Dominic Chirichella, senior partner at Energy Management Institute in New York.
Investors had seen some encouraging signs in data out of China. Exports from the country fell 1.4 percent from a year earlier, better than a Reuters poll forecast an 8-percent drop.
Benchmark 10-year U.S. Treasury notes rose 10/32 in price to yield 2.0647 percent, from 2.1 percent late on Tuesday.
The U.S. dollar edged down 0.05 percent against a basket of currencies, set to break a three-day winning streak. The euro was little changed against the dollar.
Spot gold was up 0.7 percent, after three sessions of declines.
Additional reporting by Catherine Ngai, Jessica Resnick-Ault and Gertrude Chavez-Dreyfuss in New York, Abhiram Nandakumar in Begaluru, Patrick Graham and Atul Prakash in London; Editing by Louise Ireland, Nigel Stephenson and Nick Zieminski