Stocks dived more than 3 percent on Thursday, extending losses for a fourth day, as a bleak outlook from the Federal Reserve and weak data from China heightened fears of a global recession.

In one sign of the broad gloom, FedEx Corp fell 9 percent to $66.31 after the world's No. 2 package delivery company pared its outlook for the full year.

The market's dramatic selloff marked the worst performance in more than month after the previous session's drop, which was sparked by the Fed's statement citing significant downside risks facing the economy.

The word 'significant' proved to be significant, said Stephen Wood, chief investment strategist at Russell Investments in New York.

This seems like an indiscriminate risk-off environment, where sectors and specific securities and research don't count for as much ... investors are jettisoning risk as the outlook gets cloudier.

In addition to the statement on Wednesday, the U.S. central bank detailed additional stimulus measures to help push down long-term rates. Investors worried the latest plan would have little effect on lending and that there appeared to be few solutions to sluggish worldwide demand.

The Dow Jones industrial average was down 388.18 points, or 3.49 percent, at 10,736.66. The Standard & Poor's 500 Index was down 35.53 points, or 3.05 percent, at 1,131.23. The Nasdaq Composite Index was down 69.68 points, or 2.75 percent, at 2,468.51.

The CBOE Volatility Index, Wall Street's fear gauge, was up about 10 percent.

Banks were among the top decliners. The Fed's plan to lower long-term rates will compress margins for banks that borrow at short-term rates and lend at longer-term rates. The declines also came a day after Moody's cut debt ratings for big lenders.

Citigroup Inc and Morgan Stanley fell to 52-week lows earlier in the session before recovering slightly. Citigroup was down nearly 5 percent to $24.25 and Morgan Stanley slid 7.5 percent to $12.81.

The Select Sector Financial Sector SPDR funds was off more than 3 percent, also touching a 52-week low.

Data from China showed once-booming manufacturing contracted for a third consecutive month, while the euro zone's dominant service sector shrank in September for the first in two years, intensifying anxiety about another global setback.

Continued anxiety about the euro zone sovereign debt crisis also damaged confidence after several world leaders demanded Europe take more decisive action, with political risk in the region challenging many market strategists to call a bottom to the market.

In other company news, Hewlett-Packard shares slid 4 percent to $23.02 as the largest U.S. technology company was on the verge of naming former eBay Chief Executive Meg Whitman its new chief executive.

United Technologies Corp tumbled 8 percent to $68.94 after the diversified U.S. manufacturer agreed to pay $16.5 billion for aircraft components maker Goodrich Corp. Goodrich was up 11 percent to $120.60 after hitting an all-time high.

In the latest domestic data, Americans filed fewer new claims for jobless benefits last week, but the decline was not enough to dispel worries about the economy.

(Reporting by Claire Sibonney; Editing by Kenneth Barry)

China Meg Whitman Citigroup Morgan Stanley