Dow down 300

The Dow finished down 304 points, or 2.7 percent, its steepest drop in more than three weeks. It closed at 10,992.

Traders fear that one of the continent's heavily indebted economies could default, an event that would ripple through the global banking system and make it difficult for other European countries to borrow money.

Such an outcome could tip the world economy back into recession. In the U.S., economic growth is already slowing, and unemployment is stuck above 9 percent.