Update: Just minutes from the closing bell, the Dow was down about 500 points.

US stock markets plunged Thursday, as worries over global growth grew following a rout in Europe's markets driven by sovereign debt fears and more poor US data pointing to the economy stalling.

At 1600 GMT the Dow Jones Industrial Average was down 2.66 percent, or 316.13 points, at 11,580.00, recovering slightly after having dropped more than three percent in late morning trade.

The broader S&P 500 was off 3.03 percent to 1,222.21, while the tech-heavy Nasdaq Composite sank 3.22 percent to 2,606.39.

The markets have looked past a relatively buoyant flow of second quarter earnings results to focus on the worries over Europe's debt crisis spreading to Italy and Spain and forecasts of a weak second half for the US economy.

The US Labor Department on Thursday reported data on new unemployment claims that showed continued weakness in the jobs market.

"Stocks have retreated deeper into the red to set a new 2011 low. The bleeding continues to be broad-based," said Briefing.com.

"European banking stocks are under pressure as contagion fears work their way into Italy, the third largest economy in the eurozone."