U.S. stocks fell sharply on Thursday, with major indexes suffering their worst day in weeks as the treat of a trade war with China sparked a widespread selloff.

Losses accelerated throughout afternoon trading, pushing the S&P 500 into negative territory for the year in a decline that showed signs of panic. Also weighing on sentiment was the latest policy statement by the Federal Reserve a day earlier, which raised questions about interest-rate policy; ongoing weakness at Facebook, which led the technology sector lower; and the resignation of President Donald Trump’s lead attorney, which added another element of political uncertainty for investors.

What are the main benchmarks doing?

The Dow Jones Industrial Average DJIA, -1.84% dropped 723.42 points, or 2.9%, to end at 23,957.89. The decline took the blue-chip average to its lowest close since Feb. 8, and marked its second-lowest close of the year. At current levels, it is 10% below the all-time high hit earlier this year.

The S&P 500 SPX, -1.15% fell 68.24 points to 2,643.69, a decline of 2.5%. The benchmark index turned negative for the year, and is 8% below its all-time high. It closed at its lowest level since Feb. 9. The Nasdaq Composite Index COMP, -0.13% lost 178.61 points, or 2.4%, to end at 7,166.68. The Russell 2000 index RUT, -3.35% of small-capitalization shares fell 2.1%.

For all four, the decline marked the biggest one-day drop since Feb. 8.

The day’s losses were broad, with 10 of the 11 S&P 500 sectors down on the day. Eight of the 11 fell more than 1%, with financials emerging as the weakest sector of the day. The industry dropped 3.7% and fell to a six-week low. Industrial stocks, which are seen as most sensitive to trade policy, lost 3.3%. The only positive industry group of the day was utilities, which ended up 0.4%. The group is seen as a defensive sector that outperforms in periods of economic uncertainty.

The Cboe Volatility Index VIX, +1.11% jumped 31% to 23.35, returning back above its long-term average of 20. Wall Street’s so-called “fear index” has more than doubled thus far in 2018.

Read more:There’s been a historic amount of earthshaking stock-market volatility this year

What’s driving markets?

The Trump administration instructed the office of the U.S. Trade Representative to draw up a list of tariffs on Chinese products totaling up to $60 billion. The tariffs are expected to target sensitive technologies that the U.S. considers vital to the U.S. economy in the years ahead, and the announcement follows a similar one focused on steel and aluminum. Investors are concerns that protectionist trade policies could be met with retaliatory measures by major trading partners, and that a trade war could contribute to inflation in the economy.

Read:Trump, Xi enter rockier phase as U.S.-China trade fight heats up

See:Trump’s most market-rattling trade blasts are still to come, warns Pimco

The Fed also remained in view a day after it lifted a key interest rate but stuck to a script for three rate increases in 2018 and suggested three additional ones next year. Some investors had expected four hikes this year, and the Fed previously indicated a mere two increases in 2019.

Read more:Fed hawks and doves send different signals on rates and inflation

Facebook Inc.’s shares FB, -1.73% fell 2.7%, extending a period of sharp weakness that has taken it down 10.9% thus far this week. It is on track for its biggest weekly decline since March 2014.

The social-media giant has been enduring a firestorm and stock selloff after data-mining company Cambridge Analytica reportedly used the personal details of 50 million Facebook users without authorization. On Wednesday night, Facebook CEO Mark Zuckerberg apologized for the controversy during an interview with CNN, and said he’d be willing to testify before Congress.

The stock was a major drag on the technology sector, which fell 2.7%. The Nasdaq-100 index NDX, +0.39% , which has a heavy weighting toward large-capitalization technology stocks, fell 2.5%, closing lower for its seventh session of the past eight.

Read:Tech is responsible for nearly all of the market’s 2018 advance—despite Facebook’s stock woes

What are strategists saying?

“Tariffs leveled at intellectual property abuses by China appear to be a more direct blow” compared with the steel and aluminum tariffs, said Shawn Snyder, head of investment strategy at Citi Personal Wealth Management. “The question going forward is whether or not China sees it as a glancing blow and shrugs it off or comes back swinging.”

He added, “with so much ‘noise’ coming out of Washington right now, the focus remains solely on extrapolating potential negatives.”

What are other markets doing?

The ICE U.S. Dollar Index DXY, +0.06% was little changed. Dollar bulls found themselves disappointed by the Fed sticking to its guidance for three total rate increases this year.

European equities SXXP, +0.61% ended lower, while Asian markets mostly closed with losses.

Gold futures US:GCJ8 gained 0.5%, and oil futures US:CLK8 dropped 1.4%.

Which stocks are in focus?

The weakness in financial stocks pressured banks broadly. Goldman Sachs Group Inc. GS, -0.44% fell 3.5% while JPMorgan Chase & Co. JPM, -3.09% was down 4.2% and Bank of America Corp. BAC, -2.93% lost 4.1%.

Guess Inc.’s stock GES, -8.59% surged 28% a day after the clothing seller posted better-than-expected quarterly results.

AbbVie Inc. ABBV, -1.13% fell 13% after it said it wouldn’t seek accelerated approval for a lung-cancer drug after a mid-stage trial.

Omeros Corp. OMER, -5.28% surged 35% after a spending bill that benefits its cataract surgery drug.

Conagra Brands Inc. CAG, +1.41% reported adjusted third-quarter earnings that beat expectations. Shares rose 0.3%.

Olive Garden-parent Darden Restaurants Inc. DRI, -2.43% fell 7.9% after it reported third-quarter sales that missed expectations.

Accenture PLC ACN, -0.96% reported second-quarter earnings and sales that topped analyst forecasts. Shares fell 7.3%.

Wynn Resorts Ltd. WYNN, -6.95% fell 1.9% after Stephen Wynn, the founder and former chief executive, disclosed the sale of about one-third of his stake in the casino operator.

Pandora Media Inc. US:P jumped 7.8% after Raymond James upgraded the stock to strong buy from market perform.

What economic reports were in focus?

Initial U.S. jobless claims rose by 3,000 to 229,000 in mid-March, but they remain near the lowest levels since 1970. And the number of people collecting benefits fell to a fresh 45-year low.

A read on manufacturing from Markit hit a three-year high of 55.7 in March, while a gauge on services dipped to 54.1 from 55.9. Separately, the Conference Board said its leading economic index rose for a fifth straight month in February, up 0.6%.