Worries about China and the Federal Reserve's plans rattled global markets for a second day, sending U.S. stocks to their biggest loss this year and hammering bonds and many commodities.

The Dow Jones Industrial Average dropped 353.87 points, or 2.34%, to 14758.32, on big volume, marking its first back-to-back decline of 200 points or more since Nov. 1, 2011. Yields on Treasurys hit their highest since August 2011 as bond prices fell. Shares of home builders sank, reflecting fears that rising mortgage rates could damage the U.S. housing recovery, viewed as a key cog in any broader economic recovery.

The turmoil exposed vulnerabilities in the financial markets and the world economy that had been mostly ignored because central banks were willing to ride to the rescue with huge amounts of money.

Investors said Thursday they were buffeted by two distinct forces: worries about the health of China's economy and financial sector, and the prospect that the end of Fed stimulus could reverse the huge rally in assets ranging from 'junk' bonds to dividend-paying stocks. Gains in many of those assets had been fueled by ultralow interest rates and expectations that the Fed would continue to pump money into financial markets.

The rout underscored persistent worry about the health of the global economy at a time when the U.S. and Europe are struggling with high unemployment. Adding to the wrenching action is a cash squeeze in China, which is trying to tighten the spigot on credit without causing problems, and a report that financing for cash-strapped Greece could be in danger.

The declines came a day after Fed Chairman Ben Bernanke said that the central bank expects to begin to pare its huge bond-buying program later this year and it could end sometime next year, provided the economy unfolds as the Fed expects. The prospect of the Fed weaning the economy off extraordinarily easy credit at a time when the pace of U.S. economic growth is modest and inflation is below the Fed's target jolted markets around the world.

At the same time, many investors believe the shakeout heralds a shift toward higher interest rates and sustained, healthier U.S. growth, following a long period of ultralow interest rates that helped feed investor funds into higher-yielding investments. Those investments have declined sharply in recent weeks as the market has begun preparing for more-normal rates.

The action showed investors continue to grapple with the impact of an eventual reduction of the Fed's $85 billion in monthly bond purchases. U.S. bonds and stocks have broadly risen this year, with few sizable declines until the past month.

The market reactions were a potential jolt to the Fed. Central-bank officials have been speakingpublicly for weeks about the possibility of winding down the bond-buying program. Mr. Bernanke sought to emphasize in remarks Wednesday that the Fed would stand down if the economy stumbles.

Markets were jarred by the potential timetable that Mr. Bernanke laid out. 'With the Fed beginning to discount an exit from their policy, you're not only potentially decreasing asset prices