Retail shares were trampled after an unexpected contraction in the service sector further signaled a recession.
As a result, the Dow Jones Industrial Average plunged more than 300 points, closing down 2.9 percent to 12,265.13. The broader S&P 500 also declined 3.2 percent to 1,336.64. The WWD Composite Index, which includes apparel retailers, vendors and beauty firms, dropped 2.2 percent to 873.1, while the S&P Retail Index sank 3.5 percent to close at 396.67. The loss on the WWD Composite Stock Index followed a 2.5 percent decline on Monday.
The luxury sector fumbled, as shares of high-end department stores Saks Inc. and Nordstrom Inc. tanked. Saks closed down 8.1 percent to $16.46, while Nordstrom dropped 6.2 percent to $37.05.
Other notable decliners included J.Crew Group, which fell 5.3 percent to $41.72, action sports apparel retail Zumiez Inc., down 6.3 percent to $19.02, Aéropostale Inc., declining 6.2 percent to close at $25.78, and urban-inspired retailer Citi Trends Inc. plummeted 7.1 percent to $12.53.
The Institute for Supply Management said its January index of the service sector, which accounts for about two-thirds of the economy, dropped below 50, hitting its lowest point since October 2001. The index fell to 41.9 from 54.4 the previous month.