The Dow Jones industrial average fell almost 220 points and was on pace for its third triple-digit decline in four trading sessions. It hit its lowest point since Feb. 3, during the market's strong and steady climb earlier this year.
Prices for U.S. government debt rose for the fifth day in a row as investors sought a safe place for their money.
In the stock market, losses spread to large and small companies alike, and among both industries that perform well in good times and stocks that are seen as safe investments in bad times.
European markets sold off while Wall Street was still sleeping. Concern about the financial health of Spain intensified, and borrowing costs for that country rose considerably.
The main stock indexes in Spain and France closed down about 3 percent for the day, the equivalent of a 400-point drop in the Dow. Stocks dropped 2.5 percent in Germany and 2.2 percent in Britain.
"They've managed to put a Band-Aid on the debt crisis, but there's really no solution," said Colleen Supran, a principal at the investment adviser Bingham, Osborn & Scarborough. "And Spain is a much bigger problem than Greece."
The yield on 10-year Spanish bonds crept close to 6 percent. The point at which governments can no longer afford to raise money on the international bond markets and must seek bailouts is generally considered to be 7 percent.
The 7 percent level forced Greece, the last focal point of the European debt crisis, to seek rescue loans. But Spain's economy is more than five times as large as Greece's.
In the United States, investors waited for an earnings report from Alcoa, the aluminum maker, scheduled for just after the closing bell. Alcoa is the first of the 30 stocks in the Dow to report its quarterly results.
After nine consecutive quarters of earnings growth, analysts think earnings will decline 0.1 percent this time. Better performance than that could stop the market's decline, but a weaker showing could accelerate the selling.
Alcoa stock fell 2.6 percent ahead of the report, compared with a 1.4 percent decline for the broader Standard & Poor's 500.
"Whatever qualifications you want to give it -- it's because of cost-cutting, they've laid off a lot of people -- earnings have been one bright spot," said Adrian Day, president of Adrian Day Asset Management in Annapolis, Md. "If that were to turn, that would be sort of the last leg on the stool being knocked away."
The economic news of the day was mixed: Wholesale businesses increased their inventories in February more than analysts had expected, and more expensive gasoline drove sales higher.
The growth of wholesale restocking is still expected to be a drag on the overall economy for the first quarter, but not as much as economists thought.
Still, after the strongest first three months for stocks since 1998, investors have found plenty to fret about: The Federal Reserve is worried about the strength of job growth and not inclined to provide further help for the economy.
The Dow declined 335 points from last Tuesday through Monday. That included 131 points on Monday, the first time investors could react to a report showing much weaker job gtowth in March than in the three previous months.
Just after 2:30 p.m. Tuesday, the Dow was down 219 points at 12,710. The S&P was down 22 points at 1,360.
The Nasdaq composite index, which eked out a gain in one of the past four days, was down 52 points at 2,995 -- its first time below 3,000 in a month.
Consumer discretionary stocks, which include travel companies, clothing stores and cable companies, fell 2 percent as group, the worst-performing segment of the market.
Financial stocks fell almost as much, and even utilities and health care stocks, which are more dependable in times of economic uncertainty, were down more than 1 percent each.
The worst-performing stock in the Dow was Bank of America, which tends to take a hit when concerns about Europe grow stronger. Bank of America was down 3.8 percent.
The Dow's worst showing of the year was a decline of 203.66 points on March 6.
Last year, the Dow's longest losing streak was an eight-day, 850-point plunge in July and August, with Congress bickering over the government debt limit and just before the S&P ratings agency downgraded the U.S.
On Tuesday, the dollar and U.S. Treasury prices rose as investors shifted money into lower-risk investments. The yield on the benchmark 10-year Treasury note fell for the fifth straight day, dropping 1.99 percent from 2.04 percent Monday.
When earnings reports begin rolling in, analysts think they will reflect slowing growth in China and a tottering Europe. But "a lot of these companies are in a good spot," said JJ Kinahan, chief derivatives strategist for TD Ameritrade in Chicago.
"There seems to be this black cloud as everyone talks about the market," Kinahan said.
He noted that stocks are well up for the year. The S&P 500 was up 8 percent even counting Tuesday's decline. The Dow was up more than 4 percent and the Nasdaq 15 percent.
The low expectations for earnings could also be a blessing in disguise. Companies may have an easier time beating them, which can drive up their stock price, at least temporarily.
"CEOs have done a very good job of setting expectations low," Kinahan said.
Analysts have also worried that high gasoline prices could hurt the economic recovery. The price of oil fell below $102 per barrel Tuesday, but that was because traders are betting that a weak U.S. economy will keep demand low.
Oil nearly hit $110 last month. It was about $75 in October. The buildup has been partly because of tension over Iran's nuclear program and the oil embargos that have ensued.
Iran, which has already cut off oil shipments to France and Britain, declared Tuesday that it would extend the embargo to Greece, a pre-emptive strike against European countries that planned to stop buying from Iran. Talks on Iran's nuclear program are scheduled for Saturday.
Among stocks making big moves:
-- Supervalu Inc., the grocery chain that owns Albertsons and Jewel-Osco, climbed more than 9 percent. The company reported a quarterly loss but outlined turnaround plans that include closing stores and slashing jobs.
-- Best Buy fell almost 3 percent after announcing that its chief executive had resigned without a permanent successor. The electronics giant is struggling for market share in a retail world that's been shaken up by online companies like Amazon.