NEW YORK (AP) — There was no let-up in the flight from stocks and bonds Thursday, and the Dow Jones industrial average fell more than 300 points.

A day after the Federal Reserve roiled U.S financial markets when it said it could step back from its aggressive economic stimulus program later this year, financial markets continued to slide. A slowdown in Chinese manufacturing added to Wall Street's worries.

The breadth of the sell-off was seen across global financial markets, from sharply lower stock markets in Asia to falling government bond prices in Europe and the U.S.

The Dow fell as much as 362 points in the afternoon, its biggest drop in more than seven months. The Standard & Poor's 500 was on track for its worst performance in more than two months. Small-company stocks fell even more than the rest of the market, a sign that investors are aggressively reducing risk.

The yield on the benchmark 10-year note rose to its highest level since August 2011.

A Fed policy statement and comments from Chairman Ben Bernanke started the selling in stocks and bonds Wednesday.

Bernanke said the Fed expects to scale back its massive bond-buying program later this year and end it entirely by mid-2014 if the economy continues to improve.

The bank has been buying $85 billion a month in Treasury and mortgage bonds, a program that has kept borrowing costs near historic lows for consumers and business. It has also helped boost the stock market.

Alec Young, a global equity strategist at S&P Capital IQ, said investors weren't expecting Bernanke to say the program could end so quickly, and are adjusting their portfolios in anticipation of higher U.S. interest rates.

"What we're seeing is a pretty significant sea-change in investor strategy," Young said.

As financial markets dropped, investors likely put the proceeds of their sales in cash as they waited for the dust to settle, said Quincy Krosby, a market strategist at Prudential Financial.

Investors "are raising cash right now, for fear the deterioration will continue," said Krosby.

The S&P 500 extended Wednesday's slide, losing 34 points, or 2.1 percent, to 1,595 at 2:47 p.m. Eastern Daylight Time.

The Dow was down 338 points, or 1.9 percent, to 14,875. The Nasdaq composite fell 72 points, or 2.1 percent, to 3,369.

The Russell 2000 index, which contains small-company stocks, slumped 21 points, or 2.1 percent, to 965. The index closed at a record high of 999.99 points Tuesday.

The yield on the 10-year Treasury note rose to 2.43 percent, from 2.35 percent Wednesday.

The yield, which rises as the price of the note falls, surged 0.25 percentage point Wednesday after the Fed's comments. It's up sharply since May 3, when it hit a year low of 1.63 percent.

Government bonds are used as benchmarks for mortgage rates. The sharp increase in yields prompted investors to sell the stocks of homebuilders, whose business could be hurt if the pace of home buying slows down. Even an encouraging report on home sales Thursday failed to arrest the slide.

PulteGroup plunged $2.34, or 11 percent, to $18.43. D.R. Horton fell $2.23, or 9.6 percent, to $21.20.

Markets were also unnerved after manufacturing in China slowed at a faster pace this month as demand weakened. That added to concerns about growth in the world's second-largest economy. A monthly purchasing managers index from HSBC fell to a nine-month low of 48.3 in June. Numbers below 50 indicate a contraction.

Japan's Nikkei index lost 1.7 percent. In Europe, the FTSE 100 index of leading British shares fell 3 percent while Germany's DAX dropped 3.3 percent.