Stocks dropped on Tuesday, the first trading day of the fourth quarter, as disappointing manufacturing data stoked worries over the U.S. economy.

The Dow Jones Industrial Average closed 343.79 points lower, or 1.3% at 26,573.04 after rallying more than 100 points earlier in the day. The S&P 500 slid 1.2% close at 2,940.25. The Nasdaq Composite was down 1.1% at 7,908.68.

Tuesday marked the worst one-day performance for the Dow and S&P 500 since Aug. 23. That day, the two indexes fell more than 2% each

The Institute for Supply Management said U.S. manufacturing activity contracted to its worst level since June 2009. The ISM report follows the release of weak manufacturing data from Europe.

Shares of manufacturers such as Honeywell, 3M and Eaton rolled over on the data release, with each losing at least 2.8% lower.

President Donald Trump blamed the a strong dollar and high interest rates for the weakness in U.S. manufacturing. In a tweet, he said the Federal Reserve and Chairman Jerome Powell were "pathetic" in their handling of the economy.

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ISM Chair Timothy Fiore pointed to trade weighing on manufacturing in a statement.

"The manufacturing side is telling us something. It's a combination of global growth and we've got a trade war that's been going on for a year and a half," said Christian Fromhertz, CEO of The Tribeca Trade Group. "That's been freezing things up. The longer this trade war keeps going, the more damage it does."