U.S. stocks tumbled, with the Russell 2000 Index extending losses from a record to 10 percent, while Treasuries (USGG10YR) rallied as the Federal Reserve remains on pace to end bond-buying this month amid growing signs of economic weakness in Europe.

The Standard & Poor’s 500 Index (SPX) declined 1.2 percent at 2:30 p.m. in New York. The Russell 2000 dropped 1.3 percent and is down 10 percent from a March record, meeting the common definition of a correction. The Dow Jones Transportation Average sank 2.3 percent, the most since February, as airlines retreated. The Stoxx Europe 600 Index lost 0.8 percent. The rate on 10-year Treasury notes sank eight basis points to 2.41 percent. Brent crude fell to its lowest level in more than two years.

Euro-area factories reduced prices by the most in more than a year and German manufacturing shrank, underlining the mounting challenge facing policy makers before the central bank meets tomorrow. U.S. manufacturing cooled in September following the strongest rate of growth in three years, while companies accelerated hiring for the first time in three months. A person familiar with German government policy said Russia risks an escalation of sanctions. Hong Kong’s pro-democracy protests swelled for a sixth day.

“The headwinds have come to the forefront and investors are starting to recognize that,” Randy Bateman, chief investment officer of Huntington Asset Advisors, which manages about $2.8 billion, said by phone. “You’ve got a whole bunch of geopolitical situations and you have concerns about economic weakness. We’ve always relied on the Fed priming the pump. This is the month the pump dries up so now people are focused on these other issues.”

David Fuller's view

‘It never rains but it pours.’  Investors will largely ignore bad geopolitical news while stock markets remain in orderly uptrends, but those do not carry on indefinitely and Wall Street’s canary in the coalmine has gone silent.

The cause is deteriorating market breath indicated by the Russell 2000 Index, which just saw its lowest close since November 2013, when it was still in an uptrend rather than completing a top formation.  A clear upward dynamic, which looks unlikely at this time, is required to delay downward scope for more than a brief pause.  The S&P 500, Nasdaq 100 and Dow Jones Industrial Average have been much firmer, and have yet to lose medium-term uptrend consistency, but are susceptible to at least further mean reversion towards their MAs.  All have found resistance near roundophobia levels and the S&P would break its long progression of higher reaction lows and fall beneath the MA on a move below 1900.  The risk of a 10 percent plus correction for the main indices, which RTY has all but seen as of today, remains very high.