U.S. stocks sustained heavy losses on Thursday as traders ditched a wide swath of assets, leading the blue-chip average to hit the flat-line for 2014.

The Dow Jones Industrial Average fell 317 points, or 1.9%, to 16563, the S&P 500 tumbled 39.7 points, or 2%, to 1931 and the Nasdaq Composite dropped 93.1 points, or 2.1%, to 4370.

In a sign of the breadth of the selloff, every major sector was down by at least 1%. The biggest losers could be found in telecommunications, technology, energy and health care. Volume on the New York Stock Exchange was running about 40% higher than the one-month average. The VIX, a measure of implied volatility in U.S. stocks, surged 26%. 

ExxonMobil (XOM), the world's biggest publicly-traded energy company, revealed stronger-than-expected profits on the day, but revenues missed expectations. The Dow heavyweight's shares fell more than 1%, suggesting they would weigh on the blue-chip average. 

Meanwhile, shares of fast-food behemoth Yum Brands (YUM) came under heavy selling pressure after the firm said news reports suggesting its supplier in China might have been using past-expiration-date meat had a ""significant, negative impact" on same-store sales at its KFC and Pizza Hut chains in the world's No. 2 economy. 

On the economic front, the Labor Department said the number of Americans filing for first-time unemployment benefits rose last week to 302,000 from a downwardly revised 279,000 the week prior. Wall Street expected claims to rise to 301,000 from an initially reported 284,000.

"While summer auto plant seasonal issues are an influence, the trend in claims is still pointing to a reduction in the pace of firings," Peter Boockvar, chief market analyst at The Lindsey Group, wrote in a note to clients. 

The Institute for Supply Management-Chicago’s gauge of manufacturing activity in the Midwest region slowed to 52.6 in July from 62.6 in June, widely missing economists’ expectation of a reading of 63. In July, the index reached its lowest level since June 2013.

The data come ahead of the closely-watched monthly jobs report from the Labor Department due on Friday. 

Looking abroad, Argentina was at risk of defaulting for the second time in 13 years as the Latin American country failed to strike an agreement with a group of hedge funds looking to get paid for a 2001 bond default. 

Art Cashin, the director of floor operations for UBS Financial Services at the New York Stock Exchange, noted in a letter to clients the news was "sending ripples through various assets." However, analysts broadly said a default was unlikely to have a wide-ranging impact on the massive American financial sector. 

'A Lot of Noise'

Despite the selling Thursday, Michael Block, chief strategist at Rhino Trading Partners, said he is still bullish in the near-term. 

"This is all a lot of noise," he told clients, referring to the mixed corporate results and debt turmoil in Latin America. "And with that, I am sticking by my desire to own stocks on weakness."

Indeed, traditional safe-haven assets that would generally see buying in a broad-based selloff performed poorly on the day. Gold prices fell $8.10, or 0.62%, to $1,289 a troy ounce. The yield on the 10-year U.S. Treasury bond climbed 0.036-percentage point to 2.596% as traders bid-up the asset. 

Elsewhere, the benchmark U.S. crude oil contract slumped 66 cents, or 0.67%, to $99.61 a barrel. Wholesale New York Harbor gasoline slipped 0.48% to $2.802 a gallon. 

Follow Adam Samson on Twitter @adamsamson.