MARKET SNAPSHOT: U.S. Stocks Cut Losses In Harrowing, Volatile Session

By Anora Mahmudova and Barbara Kollmeyer, MarketWatch

NEW YORK (MarketWatch) -- Wall Street flirted with its worst decline in more than 3 years in a roller -coaster day of trading that culminated with shares recovering from the depths of what began as a bona fide market rout Wednesday.

U.S. stocks sold off amid the largest volume in nearly three years, as investors jettisoned risky securities and scrambled for the safety of government bonds as 10-year Treasurys surged and yields briefly dipped below 2%, until settling at a 52-week low.

Implied volatility on the S&P 500, as measured by the CBOE Vix index jumped to levels not seen in more than 2 years. Vix rose 15% to 26. Read: Here's what's driving the market meltdown

The S&P 500 (SPX) briefly turned negative for the year before rebounding and on intraday basis recorded a 9.8% decline from peak to trough. The benchmark index closed down 15.21 points, or 0.8%, to 1,862.49.

The Dow Jones Industrial Average (DJI) fell as much as 460 points, but finished down 173.45 points, or 1.1%, to 16,141.74.

The Nasdaq Composite (RIXF) at one point entered correction territory, falling more than 10% from its previous peak, but regained its footing, finishing with modest losses. The tech-heavy index closed down 11.85 points, or 0.3%, to 4,215.32.

Meanwhile, the Russell 2000 (RUT) defied selling pressure and finished the day up 7 points, or 0.7%, at 1,069. Recap of today's stock market coverage live blog.

Strategists at Voya Investment Management blamed a "perfect storm" on the selloff. That storm includes: "The surging dollar, plummeting oil prices and recessionary bond yields are creating havoc in the markets because they are signaling deflation. No, not just in Europe but globally as well," they wrote in a note.

Read: These 5 charts explain when to call a bottom in the S&P's slide

Disappointing economic reports added to already jittery sentiment on Wall Street. Reports on manufacturing in the state of New York and U.S. wholesale prices missed expectations, and a reading on retail sales showed a decline for the first time in eight months. Read: It's the momentum of the economic data that's worrisome

Today's market-moving news: The financial sector led the rout in U.S. stocks on Wednesday, as investors grew concerned about a range of issues from the economy to inflation to the current Ebola outbreak.

Bank of America (BAC) reported a third-quarter loss that was smaller than expected, however, shares fell 4.6%.

J.P. Morgan Chase & Co. (JPM) was the biggest loser in the Dow Jones Industrial Average falling 4.2%. The Financial Select Sector SPDR Fund (XLF), which tracks financial stocks in the S&P 500 SPX fell 3.4%.

AbbVie Inc. (ABBV) shares rose 0.9% after the U.S. drug maker indicated it's reconsidering a $54 billion deal to buy Shire PLC in light of new Treasury rules that make that deal less attractive. Shares of Shire slumped 22% in London, weighing on the FTSE 100, while its U.S.-listed shares (SHPGY) sank 30%.

The AbbVie news spilled over to other so-called inversion plays. Covidien PLC(COV), which earlier this year agreed to be acquired by Medtronic Inc.(MDT), led S&P 500 decliners, falling 7%.

Hazmat-suit related companies that recently rallied on Ebola fears were surging once again. Shares of Lakeland Industries Inc. (LAKE) rallied 10%, Alpha Pro Tech Ltd. (APT) jumped 14% and Versar Inc. (VSR) soared 65.24% to $6.94. .

American Express (AXP), Netflix Inc. (NFLX) and eBay Inc. (EBAY) report after the close. Check out MarketWatch's for previews.

Other markets: Asian stocks largely rebounded from Tuesday losses. European stocks skidded, and the benchmark Stoxx Europe 600 has fallen more than 10% from its 2014 high reached in June, putting it in correction territory.

Crude-oil prices (CLZ4) fell slightly, while gold prices (GCZ4) edged up.

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