Stocks plunged Tuesday after a selloff in China and a weak economic report in the U.S. scared risk-taking investment optimists around the world.

The Dow Jones industrial average sank 416.02 points, to 12,216.24, the seventh-largest one-day point drop ever.

All 30 stocks in the Dow fell, and the 3.3 percent slide wiped out the year's gains. The broader Standard Poor's 500 index and the Nasdaq composite index also fell into the red on a year-to-date basis.

Traders said the selloff began after the Shanghai stock market lost nearly 9 percent of its value, reflecting efforts by the Chinese government to control stock market speculation. Markets continued to drop in Europe. In America, a weaker-than-expected report on new orders for durable goods raised fears that a recession may lie ahead, a prediction that was uttered a day earlier by former Federal Reserve Chairman Alan Greenspan.

Treasury securities rallied strongly, as investors switched to less risky securities. But gold, often a haven at times of stock markets stress, sank. Traders said the move in gold indicates that speculative sentiment is fading.

They also note that a stock market pullback in China might curtail the demand for gold jewelry in that country.