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The Dow plummeted 326 points -- and the S&P 500 tumbled 2.3% -- as anxiety swelled over the global factory sector and instability in emerging markets. 

Today's Markets

The Dow Jones Industrial Average fell 326 points, or 2.1%, to 15373, the S&P 500 slumped 40.7 points, or 2.3%, to 1742 and  the Nasdaq Composite dropped 107 points, or 2.6%, to 3996.

January was a tough month. The S&P 500 slid 3.6% in the broad market average's worst month since May 2012 and its worst January since 2010. 

The tumble was driven by worries about intense volatility in emerging-market currencies, coupled with brewing trouble in China. So far, February is off to a similarly grim start.

"It doesn't appear likely we'll be rebounding any time soon," said Todd Schoenberger, managing partner at LandColt Capital. He said without the "safety net" cast by the Federal Reserve's bond-purchase program, which is being slowly phased out, the market could be in for more turbulence.

"Traders are as pessimistic as I've seen them in years," he said. 

Still, many analysts remained bullish, and said the recent drop could represent a buying opportunity. 

"The acute nature of currency and political turmoil in particular developing countries is certainly a concern, as are the implications of the Fed’s decision to proceed with a second round of tapering," David Joy, chief market strategist at Ameriprise Financial said in an email. 

"Nevertheless, the U.S. is widely expected to enjoy an accelerating economy in 2014, with growth approaching 3.0 percent, resulting in growing earnings and sheltering the U.S. equity market from the brunt of those negative influences."

Global Manufacturing Data Ignite Worries 

The Institute for Supply Management said manufacturing activity in the U.S. slowed to 51.3 in January, compared to 56.5 the month prior, widely missing estimates of 56. Readings above 50 point to expansion, while those below indicate contraction. 

"We expect manufacturing activity growth to pick up throughout the year, although the readings in coming months will be useful in determining how much, if any, of the January softness was due to transitory factors," analysts at Barclays wrote in a note to clients. 

The all-important monthly jobs report from the Labor Department is also due out on Friday. 

Adding to the gloomy sentiment, an official reading on China's manufacturing sector showed the factory sector in the world's No. 2 economy is barely growing. The PMI gauge came in at 50.5 in January from 51 in December. 

"We think that some part of the weakness was due to the Chinese New Year holiday. However, together with the HSBC/ Markit reading, it is getting clearer that the economic slowdown has begun again," Wei Yao, an analyst at Societe Generale wrote in an email to clients.  

S&P 500 Skids Into 'Pullback' Mode

The broad S&P 500 plummeted into pullback mode -- a 5% drop from its record high. It joins the Dow, which dropped into a pullback last week. Both market barometers closed at their lowest levels since October. 

Meanwhile, traders bid up safe-haven assets. Indeed, the yield on the benchmark U.S. 10-year Treasury bond slid 0.084 percentage point to 2.585% -- the lowest since December 11. Gold rallied $20.30, or 1.6%, to $1,260 a troy ounce.

In a sign of the gloomy sentiment, the CBOE's VIX, seen as Wall Street's fear gauge, surged 16.5% to its highest level in seven months in mid-day trading. 

On the corporate front, Ford (F) posted a 7% year-over-year dip in January U.S. sales. General Motors (GM) saw its sales slid 12%, while Chrysler saw an 8% increase. 

In commodities, U.S. crude oil futures climbed 8 cents, or 0.08%, to $97.58 a barrel. Wholesale New York Harbor gasoline slid 1.3% to $2.627 a gallon. 

Follow Adam Samson on Twitter @adamsamson.