The Dow Jones industrials fell 93.87, or 0.9%, to 10,332.44. Energy and material stocks showed the biggest losses as a jump in the dollar sent commodity prices tumbling. Meanwhile, an analyst's downgrade of the chip sector pulled technology shares sharply lower.

In the broad market, the Standard & Poor's 500 index fell 14.90, or 1.3%, to 1,094.90, while the Nasdaq composite index fell 36.32, or 1.7%, to 2,156.82.

As stocks fell, investors flocked to the dollar and Treasurys. The yield on the three-month T-bill, considered one of the safest investments, tumbled to its lowest level since last December. Overseas markets were also down sharply.

In another sign of the market's uneasiness, the Chicago Board Options Exchange's Volatility Index, also known as Wall Street's fear gauge, rose more than 9%.

The day's trade was a shift out of riskier assets and back into safe havens like the dollar and Treasurys. After amassing significant gains during an eight-month rally in stocks, investors are hesitant to take on too many extra risks as the year ends, worried that the economy's rebound might not be sustainable.

"Large money managers, going into the end of the year, are looking to protect their gains and are shifting assets," said Adam Gould, senior portfolio manager at Direxion Funds in New York.

For much of this year, investors have been selling dollars and putting their money in assets like stocks and commodities that have the potential to earn higher returns, believing that the economy was recovering. Commodity producers and other companies with major export operations have been among the biggest beneficiaries of the dollar's slide.

Now, investors are starting to wonder whether the dollar's decline has run its course and that other markets have gotten a little overheated considering the challenges the economy still faces, like high unemployment.

The latest data on the economy gave investors little incentive to hold on to stocks. A report from the Labor Department Thursday indicated that the economy is still shedding jobs, and the Mortgage Bankers Association reported a surge in foreclosures.

Still, analysts warn that the dollar's rise Thursday doesn't necessarily mark the beginning of a long-term trend. So long as the Federal Reserve keeps interest rates low to support the economy, the dollar will likely weaken.

Bonds rallied as stocks fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.35% from 3.37% late Wednesday. The yield on the three-month T-bill was holding steady at 0.02%, after earlier falling to as low as 0.005%.

The ICE Futures US dollar index, which measures the dollar against other major currencies, gained 0.3%, weighing on commodities prices. Gold prices inched higher, while oil prices dropped $2.12 to $77.46 a barrel on the New York Mercantile Exchange.

Analysts said the dollar was the biggest force behind Thursday's trading, as it has been in recent months. A stronger dollar makes commodities more expensive to foreign buyers, and companies that produce the commodities make less money from them.

"There might be a little fear out there about dollar strengthening, as well as some natural profit taking opportunities," said Dan Cook, senior market analyst at IG Markets Inc. in Chicago. "We've been on an amazing run."

The stronger dollar also makes U.S. goods and services more expensive, and theoretically harder to sell, overseas. And U.S. companies that do business abroad make less money when their earnings are translated from other countries' currencies into dollars.

Among the day's economic news, the Mortgage Bankers Association said more than 14% of American homeowners with a mortgage were either behind on their payments or in foreclosure at the end of September. Investors are worried that loan defaults could continue to rise as long as unemployment keeps rising.

The government said Thursday that the number of newly laid-off workers seeking unemployment insurance was unchanged last week at 505,000, in line with expectations. But the figure remains above the level that would indicate the economy is adding jobs.

Also Thursday, a private group's forecast of economic activity rose less than expected in October, signaling slow growth next year. The Conference Board said its index of leading economic indicators, which forecasts activity over the next six months, rose 0.3% last month, less than the 0.5% gain economists anticipated. The index climbed 1% in September.

The market's losses added to a modest decline on Wednesday when stocks slipped on a drop in home construction and worse-than-expected forecasts from technology companies.

A drop in technology shares weighed on the market again Thursday, after chipmakers, including Intel, were downgraded.

"If a company like Intel isn't going to do as was well as people think, then that has many ripple effects," said Gould of Direxion Funds, adding that technology has been one of the areas of the economy thought to be strengthening.

Overseas, Britain's FTSE 100 fell 1.4%, Germany's DAX index lost 1.5%, and France's CAC-40 slid 1.8%. Earlier Thursday, Japan's Nikkei stock average fell 1.3%.