NEW YORK - Fears that the economy is stalling sent the Dow Jones industrial average down 280 points, erasing more than a quarter of the stock market's gains for the year. Treasury bond yields fell to their lowest level since December as traders put a higher value on safer investments.

The Dow dropped 279.65 points, or 2.22 percent, to 12,290.14. It was the biggest point drop since June 4 of last year, and the largest percentage drop since August. The S&P index lost 30.65, or 2.28 percent, to 1,314.55. The Nasdaq composite fell 66.11, or 2.33 percent, to 2,769.19. Wednesday's decline cost investors $400 billion.

The yield on the benchmark 10-year Treasury bond fell to 2.95 percent. Bond yields fall when prices rise.

Lingering doubts about the economy's strength were compounded by weaker-than-expected reports on manufacturing and jobs. The Institute for Supply Management's manufacturing index fell to 53.5 in May from 60.4 in April. A reading of more than 50 indicates the manufacturing industry is growing, but the index had been as high as 61.4 in February. Private employers added just 38,000 jobs in May, down from 177,000 in April, according to the payroll processor ADP. Analysts had expected 180,000 new jobs.

The manufacturing and jobs reports, plus a decline in automobile sales in May, led several economists to lower their expectations for the year. JP Morgan was among a handful of investment banks that revised downward its estimate for GDP growth in the second quarter to 2 percent. The downgrade followed one the bank issued last week. The Dow was down nearly 180 points in midday trading and lost an additional 100 points after noon as asset-management firms sent notes to their clients announcing their economic revisions.

Reports on retail sales, first-time applications for unemployment benefits, and factory orders will be released Thursday, and analysts say additional signs of economic weakness could push the market even lower.

Stock losses came across the market, with all 10 industry groups that make up the Standard & Poor's 500 index losing more than 1 percent. Companies that have benefited from expectations of worldwide growth were especially hard hit. Caterpillar Inc., Alcoa Inc., and Boeing Co. all lost more than 3 percent.

Companies reporting sales or earnings results were not spared from the broad market drop. General Motors Co. fell 5 percent after it said U.S. sales weakened in May. The automaker sold 221,192 vehicles, down 1.2 percent from a year earlier. It cited a decision to cut sales to rental-car companies for the drop. Ford Motor Co. lost 4.6 percent after reporting similar declines.

Dollar General Corp. fell 9.3 percent after the discount store operator's first-quarter profit growth fell short of analysts' expectations. Jos. A. Bank Clothiers Inc. also reported first-quarter profit growth below analysts' expectations. The men's clothing company fell 13 percent.