U.S. stocks closed sharply lower Thursday as China news overnight and low oil prices renewed concerns about global economic growth. Devaluation of the Chinese yuan and speculation of significantly more weakening in the currency also weighed on sentiment.

The Dow Jones industrial average closed down about 392 points, after earlier falling 442.88 points. The index ended more than 10 percent below its 52-week intraday high, in correction territory. The Nasdaq composite closed down 3 percent, also in correction territory. (Tweet This)



The S&P 500 ended more than 2 percent lower, about 9 percent away from its 52-week intraday high.

Read MoreMarket plunge: What you need to know



Stocks extended losses in early afternoon trade after Reuters reported, citing sources, that China's central bank is under increasing pressure from policy advisors to let the yuan currency fall quickly and sharply, by as much as 10-15 percent, as its recent gradual softening is thought to be doing more harm than good.



"Definitely the Reuters story was negative and hit the market pretty hard," said Ilya Feygin, senior strategist and managing director at WallachBeth Capital.



Traders also noted failure to hold technical levels and concerns ahead of potential Thursday night news.



Weighing on markets overnight was news the People's Bank of China set the yuan reference rate at 6.564, its lowest since 2011 and the largest daily change since Aug. 13, according to Reuters. A trade halt in China due to a circuit breaker also shook global markets.



"Another day here, another yuan devaluation. I don't think a lot has changed a whole lot coming into today except energy continues to go down," said Art Hogan, chief market strategist at Wunderlich Securities.

WTI settled down 70 cents, or 2.06 percent, at $33.27 a barrel, above session lows. Apple closed down 4.2 percent to $96.45 a share. The VIX briefly topped 25 to its highest since mid-December.



Gold futures for February delivery settled up $15.90 at $1,107.80 an ounce, helping the Gold Miners ETF (GDX) end up 4.4 percent.

Read MoreChina and its currency: 'They're riding a bronco'

As of Thursday's close, the major U.S. averages were down nearly 5 percent or more for the week, on pace for their worst since Aug. 21, 2015.

"Obviously it's really being driven right now by China and oil prices. It's been a flight to quality. ... It's not a whole lot different from what we saw last August," said John Bredemus, vice president, Allianz Investment Management.

"I don't get too concerned about a single day but we've had a couple days. This gives real concern if the U.S. economy can continue to go it alone (if) the rest of the world continues to slow," he said.