"The Spain elections certainly have some ramifications on the war on terror, and the political implications aren’t great for the U.S.," said Jay Suskind, head trader at Ryan Beck & Co. "Put that together with the lousy week we had last week, and there’s not much confidence in buying."

The past week’s selloff brought an end to the market’s one-year rally, which had started to taper off in mid-February. Resumption of the rally is unlikely for some time, said Russ Koesterich, U.S. equity strategist for State Street Corp.

"There’s been a big reduction in risk appetite over the past few months, and investors are becoming very critical," Koesterich said. "The market has discounted a lot of good news, and there’s limited upside ahead. That doesn’t mean you should get out of the market, but the easy money’s behind us."

According to preliminary calculations, the Dow fell 137.19, or 1.3 percent, to 10,102.89, its biggest drop since the 160.07 it lost March 10.

Broader stock indicators were also markedly lower. The Standard & Poor’s 500 index was down 16.14, or 1.4 percent, at 1,104.43, and the Nasdaq composite index dropped 45.53, or 2.3 percent, to 1,939.20, the biggest drop since Feb. 4.

The Dow, Nasdaq and S&P 500 were at their lowest levels since December.

Today’s session marked the third time in four sessions that the Dow fell more than 100 points, an occurrence that was commonplace during the bear market but that Wall Street has not been used to since stock prices began their ascent a year ago. Since peaking at 10,737.70 on Feb. 17, the Dow has lost nearly 635 points, or nearly 6 percent.

While analysts had been expecting the market to go through some kind of correction after a nearly one-year advance, and prices were in the process of consolidating, the reawakening of terrorism fears has made it clear that Wall Street is in at least a temporary downturn.

Even positive economic news didn’t help today. Industrial production rose by a better-than-expected 0.7 percent in February, a sign that manufacturers may finally regain ground after lagging in the overall economic recovery.

Investors also held back on buying because tomorrow’s Federal Reserve meeting was expected to give a clearer picture on whether interest rates would remain steady for the long term.

The European Commission took another step closer to finding that Microsoft Corp. unfairly abused its monopoly power with its Windows operating systems. A final ruling could come as early as next week. Microsoft slipped 22 cents to $25.16.