As of 11:00 a.m. ET, the Dow Jones Industrial Average dropped 440 points, or 2.76% to 15574. The S&P 500 shed 56 points, of 2.99% to 1825, while the Nasdaq Composite tumbled 141 points, or 3.18% to 4333.

The energy sector was the biggest decliner on the session, followed by materials and telecommunications, as all 10 S&P 500 sectors found themselves firmly in negative territory.

Today's Markets 

Pessimism that pervaded Wall Street on Tuesday seeped into sentiment on Wednesday, sending U.S. equity markets sharply lower. The broader averages were down more than 10% year to date, while the Nasdaq has so far seen losses of more than 13% since the start of the year.  

The main culprit for the selloff: Continued downward pressure in the oil patch. Prices of U.S. crude dropped below $28 for the first time since 2003. Worrying investors is a worldwide supply glut that only looks to get worse as more production from Iran comes online after international sanctions were lifted last week. 

What’s more, the International Energy Agency on Tuesday said it expects excess supply to keep the oil market oversupplied through late this year, which the IEA said could make 2016 the third-consecutive year of supply exceeding demand by one million barrels per day.  

Oil prices have so far tumbled 74% from their July 2014 high, and 81% from their all-time high set in July 2008. 

In recent action, West Texas Intermediate crude dropped 5.45% to $26.91 a barrel, while Brent, the international benchmark, declined 4% to $27.65 a barrel. 

The energy sector dropped 6% in recent action while more than half of the energy stocks in the broader S&P 500 touched their lowest level in at least a year.  

"Oil remains below $29 a barrel and looks more inclined to test the limits of how low it can go, rather than find any traction regardless of the consequences," IG market analyst Alastair McCaig said in a note. 

Weekly oil inventory data from the American Petroleum Institute was due out at 4:30 p.m.

The price action helped send global markets sharply lower on Wednesday as Japan's Nikkei officially joined China's Shanghai Composite in bear-market territory. Meanwhile, the MSCI All-Country World index dropped 20% from its recent high, entering a bear market as well.

Traders rushed to safe-haven assets including gold, which saw a gain of 1.16% to $1,101 a troy ounce, while the yield on the 10-year U.S. Treasury bond fell below 2%. In recent action, the yield fell 0.080 percentage point to 1.958%. Yields move in the opposite direction of prices.  

U.S. traders parsed a duo of economic reports including housing starts and consumer prices at 8:30 a.m.

The Commerce Department reports starts of new home construction dropped 2.5% last month to an annualized rate of 1.15 million units, while Wall Street expected a rise to 1.20 million units. Permits to build new homes, meanwhile, slipped 3.9% to an annualized rate of 1.23 million units, a smaller decline than the 1.20 million units expected. 

The CPI gauge showed inflation at the consumer level fell 0.1% last month, while economists expected it to remain steady. Excluding the volatile food and energy components, prices rose 0.1%, slightly lower than the 0.2% expectations.

Deutsche Bank’s economics team, in a note late Tuesday, said although they’re not forecasting a recession, their outlook on the U.S. economy has grown more cautious thanks in part to narrow GDP growth.

“The manufacturing sector is a leading indicator of the broader economy, and it is in a recession. We recently marked down our estimate of Q4 2015 real GDP growth...to 0.5%...yet in light of last week’s retail sales and inventories data, that estimate could be too high,” the note read.

The three-month annualized change in retail sales with gasoline sales stripped out, was 2.4% last month, the lowest reading since February, the team noted, while retail inventory accumulation was twice that.

“The fact that consumption is growing does not necessarily eliminate the recession risk, because other, more volatile components of GDP, namely investment and net exports, could precipitate a downturn,” they said. “There have been numerous periods when the economy went into recession and yet overall consumer spending remained positive.”  

Elsewhere in the market, traders eyed the end of bank earnings season with the release of Goldman Sachs (GS) fourth-quarter results. The investment bank’s quarterly profit plunged 65% thanks to a $5 billion settlement with the Justice Department and other authorities over its mortgage-bond sales practices ahead of the 2008 financial crisis. It was Goldman’s largest regulatory penalty in history. Meanwhile, revenue fell to $7.27 billion from $7.69 billion.

Shares of Goldman hit a fresh 52-week low of $153.56 a share.

Meanwhile, IBM (IBM) shares dropped 6%, notching a fresh 52-week low after the blue-chip technology company reported a beat on both lines in the fourth quarter, but issued a gloomy 2016 forecast and reported a drop in revenue for the 15-straight quarter.

“Earnings thus far have not provided a buffer to offset the stampede for the exits,” Peter Kenny, independent market strategist, said in a note. “Global themes continue to reinforce a sense of foreboding…if markets are unable to find a justification to hold these levels, and there doesn’t seem to be a case for that at the moment, look for the next leg lower to be efficient and painful.”