The Dow Jones industrial average tumbled 241.73 points, or 2.1 percent, to close at 11,386.33. All 30 of its components ended lower, led by a 5.5 percent slide in American International Group shares.

Nasdaq slid 2 percent to 2,365.59 and the Standard and Poor 500 was off 2 percent at 1,266.89.

Crude oil prices edged up 52 cents, or 0.5 percent, to finish at $115.11 a barrel.

The dollar was mixed, with the euro falling to $1.4751 from $1.4774, Against the Japanese currency, the dollar fell to 109.32 yen, down from 110.06 yen.

Treasury prices rose. The two-year note was up 5/32 to yield 2.333 percent. The benchmark 10-year note was up 22/32 to yield 3.789 percent.

In economic news, the National Association of Realtors said existing-home sales climbed 3.1 percent in July, rising more than expected. But, in a worrisome development, inventories rose to a record high, and prices continued to fall.

Overseas, Tokyo's Nikkei 225 index closed up 1.68 percent at 12,878.66. The London exchange was closed for a holiday.