The S&P/TSX composite index, the benchmark index of the Toronto Stock Exchange, closed in bear market territory Thursday amid global concerns of economic volatility in China and plummeting commodity prices, ending a bull market run that began in 2013.

The TSX ended the trading day down 278 points, or 2.19 per cent, to 12,448, marking a seventh consecutive day of losses. That close is more than 20 per cent below its peak of 15,657 on Sept. 3, 2014 — meaning Canada's main stock index has satisfied conditions of a bear market.

Bear markets are generally marked by periods of deep pessimism among traders, during which already low stock prices fuel continued sell-offs.

Markets in the U.S. also showed signs of significant distress. The Dow Jones industrial average fell 392.41 points, or 2.32 per cent, to close at 16, 514.10, making it the worst ever start to a year for the market. The S&P 500 lost 47.17 points, or 2.37 per cent, closing at 1,943.09, which is that market's worst start to a year since 1928.

The Nasdaq also plummeted, declining 146.33 points, or 3.03 per cent, to 4,689.43. Thursday's drop pushed the tech-heavy market into what analysts call a "correction," or a drop of 10 per cent from a recent peak.

While the Nasdaq is so far the only major U.S. index to enter a correction, the other two are getting close. The Dow average is down 9.8 per cent from its peak in May, and the S&P 500 index has lost 8.8 per cent since then.

European markets also dropped. Germany's DAX slid 2.3 per cent, France's CAC 40 gave up 1.7 per cent and Britain's FTSE 100 lost 2 per cent.

The Canadian dollar finished the day below 71 cents US at 70.94 and is now hovering near 12½-year lows.

All that matters for markets right now is 'China can't get their act straight'. - John Canally, chief economic strategist at LPL Financial

In a note to investors issued Wednesday, BMO Financial Group chief economist Douglas Porter noted that the loonie is "getting into terrain that it has really only been in the 1994-2004 era" when it averaged less than 70 cents US.

He added that plunging oil prices, which briefly fell below $33 US Thursday and are hovering around 12-year lows, are adding to the loonie's woes. The February contract for benchmark crude oil slumped 70 cents to US $33.27 a barrel by trading day's end.

'Spiralling out of control'

The stock market blows come after the Chinese government allowed the yuan to depreciate to its lowest level in five months, triggering a seven per cent plunge in China's main index that caused trading to be halted just 30 minutes after opening. The decision to let the currency weaken was seen as a bad sign for the health of the country's economy, the world's second largest.

The malaise spread across continents, sending indexes sharply lower in Canada, the U.S. and Europe.

Multiple North American stock markets fell more than two per cent Thursday. (Spencer Platt/Getty) "There is certainly a sense that the situation is spiralling out of control," wrote David Rees, senior markets economist at Capital Economics in London, in a morning note to investors.

In an apparent bid to promote market stability, the Chinese regulator announced late Thursday that by the opening time Friday, it would suspend the "circuit breaker" rule that halts trading after a loss of seven per cent — a mechanism increasingly seen as inadequate to prevent volatility.

"The management of the Chinese economy is the real concern," said John Canally, chief economic strategist at LPL Financial in Boston, Mass.

"All that matters for markets right now is 'China can't get their act straight'."

The new year has started with multiple troubling indicators that China's economic growth may be slowing considerably as the government prepares to remove measures that were introduced last year to prop up share prices after a meltdown in June.

With Beijing accelerating the yuan's depreciation to make its exports more competitive, investors fear China's economy is even weaker than had been imagined. The effects are being felt in markets worldwide.

"There is a wall of worry under full construction brought on by China, fall in oil prices and uncertainty regarding quarterly earnings," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis.

U.S. heading for recession?

Chief fixed income strategist at Hilltop Securities Mark J. Grant said in an analysts note that the signs are pointing to an inevitable recession in the U.S.

Market volatility in China and plunging oil prices have fuelled chaos in stock markets worldwide. (Brendan McDermid/Reuters) "I reached the conclusion, quite some time ago, that we were in trouble," he said. "My convictions have been reinforced with the passing of days, and I see no change of direction in the immediate future."

Billionaire investor George Soros, speaking at an economic forum in Sri Lanka, drew similarities between the present environment and the financial crash of 2008. He said global markets are facing a crisis and investors need to be very cautious, Bloomberg reported.

The World Bank also cut its global economic growth forecast for 2016, saying the weak performance of major emerging market economies will tamp activity overall, as will anemic showings from developed countries such as the United States.