U.S. stocks swooned in their biggest one day drop in nearly a month as fears mounted over a slowdown in Chinese economic growth and criticism of the Federal Reserve's recent action grew.

The Dow Jones Industrial Average earlier dipped below the 11000 level, and was recently down 190 points, or 1.7%, at 11012. The Dow hasn't closed below 11000 since Oct. 19, when the measure fell 2%. Alcoa was among the worst performing of the Dow's 30 components, falling 3.1% on concern that the push to limit growth in China could lead to lower demand for aluminum. Fears that China would move to raise interest rates also hit commodities prices Tuesday.

With commodities and stocks falling, investors noted that the market was cutting into the rally that had preceded the Federal Reserve's announcement of its $600 billion bond buying program, or quantitative easing, referred to as QE in the market.

The Nasdaq Composite dropped 1.7% to 2472, while the Standard & Poor's 500 stock index fell 1.7% to 1177. Concerns over China's monetary policy have mingled with growing skepticism over the effectiveness of the Fed's announcement earlier this month.

European markets

European stocks ended sharply lower Tuesday, with financial and mining shares getting particularly hard hit, after worries about the Chinese economy and uncertainty over whether Ireland will accept a bailout sparked a sell off. The Stoxx Europe 600 index dropped 2.3% to close at 265.98.

Mining stocks led the decline after fears of an interest rate hike returned to haunt the Chinese market, weighing on commodity prices. Shares in Rio Tinto PLC tumbled 4.8% and Kazakhmys PLC slumped more than 6%. The sector's decline helped pull the U.K.'s FTSE 100 index down 2.4% to 5,681.90. Steel maker ArcelorMittal dropped 4.6% in Amsterdam.

In Paris, the CAC 40 fell 2.6% to 3,762.47 and in Frankfurt the DAX 30 index dropped 1.9% to 6,663.24. Banking and insurance stocks fell sharply on escalating sovereign debt worries. Societe Generale dropped 4.5%, BNP Paribas fell 3.5% and Lloyds Banking Group tumbled 4.7%.

Ireland's ISEQ index dropped 1.4%, as euro-zone finance ministers met in Brussels amid growing speculation that a bailout for Ireland is in the works. After the European markets closed, Ireland's prime minister said that the nation has made no application for external support and that its upcoming budget plan would be clear and map out a way forward.

Asian stock markets ended mostly lower Tuesday with property developers in China falling on further tightening measures targeting the sector, while a rate hike from the Bank of Korea weighed on Seoul shares. Japan's Nikkei Stock Average fell 0.3%, South Korea's Kospi lost 0.8%, and Taiwan's Taiex gained 0.9%.

China's Shanghai Composite ended 4.0% lower and Hong Kong's Hang Seng Index fell 1.4%. Chinese property stocks tumbled on mainland bourses as well as in Hong Kong, after Beijing Monday announced new limits on the ability of foreigners to buy residential or commercial property on the mainland in its latest effort to curb hot money inflows and ease inflationary pressures.

Poly Real Estate Group lost 5.5% in Shanghai and China Vanke Co. shed 4.3% in Shenzhen.Among Chinese developers traded in Hong Kong, China Overseas Land & Investment fell 2.5% and Shimao Property Holdings fell 2.4%.

In Seoul, the market was hurt by the Bank of Korea's decision to hike its policy rate by 25 basis points to 2.50%, as the central bank resumed its monetary tightening campaign to tame inflationary pressures. Samsung Heavy Industries fell 3.8%, LG Electronics dropped 1.8% and LG Display declined 1.4%.

Hyundai Engineering & Construction slumped 14.9% after Hyundai Group was selected as the preferred bidder for a stake in the company, a person at a creditor bank with direct knowledge of the deal told Dow Jones Newswires on Tuesday.

In Tokyo, the U.S. dollar's gains against the yen prompted some buying in exporters' stocks. Still, caution against the backdrop of sovereign concerns in Europe capped gains in exporters. Sony Corp. added 1.8%, Nintendo Co. rose 0.7% and Mazda Motor added 2.8%.

Base metals closed lower on the London Metal Exchange Tuesday, with copper slumping to a five week low on fears that China will soon announce measures to reign in inflation and cool its buoyant economy. The markets saw a broad based commodity selloff as euro-zone debt concerns also weighed on the markets and helped to propel the U.S. dollar to a seven week high against the euro.

Copper closed the day down 5.7%, aluminum down 6.6% and zinc down 8.6%. Oil prices fell sharply Tuesday on European debt worries and fears of monetary tightening in China. Light, sweet crude for December delivery settled $2.52 lower at $82.34 a barrel on the New York Mercantile Exchange. Worries over sovereign debt in the euro zone have raised concerns about petroleum demand in the euro zone and the strength of the single currency.

Investors dumped gold Tuesday as they felt less of a need for the metal as an inflation hedge, preferring the dollar as worries about euro-zone debt persisted. That added to pressure from news the exchange where gold is traded planned to raise the margin required for buying and selling the metal. The most actively traded gold contract, for December delivery, fell $30.10, or 2.2%, to settle at $1,338.40 a troy ounce on the Comex division of the New York Mercantile Exchange.

Newsletter: Subscribe to receive this report daily