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New Yrk - US stocks dived on Tuesday after Greece unexpectedly called a referendum on its latest EU bailout programme, sending global markets into a tailspin.
Sentiment also was hit by disappointing manufacturing data for China, the global economy's growth engine.
The blue-chip Dow Jones Industrial Average lost 297.05 points to finish at 11 657.96.
The tech-heavy Nasdaq Composite slid 77.45 points to 2 606.96. The S&P 500-stock index, a broader measure of the markets, shed 35.02 points to 1 218.28.
"As the door shut on a strong October for the equity markets, US stocks are beginning a new month solidly to the downside amid a flare-up in eurozone debt crisis concerns, fuelled by an unexpected call for a referendum by Greece on its austerity measures," Charles Schwab analysts said in a client note.
Stocks extended Monday's sharp losses amid rising fears that the eurozone debt crisis plan and a new bailout package for Greece were on the rails.
Greek Prime Minister George Papandreou on Monday called a confidence vote and a national referendum on last week's proposed EU debt deal, a political gamble to silence growing opposition to his policies.
Fred Dickson at DA Davidson & Co said Papandreou's announcement shook markets which showed great relief last Thursday when EU leaders announced the new bailout and reform plan.
"It is unclear what happens if the Greek people vote down the reforms required for the current round of bailout funds from the International Monetary Fund and the European Central Bank," Dickson said.
Adding to weaker sentiment was data from the world's second-biggest economy China which showed manufacturing activity slowed last month.
The official Chinese purchasing managers' index (PMI) dropped to 50.4 in October from 51.2 in September.
"Some pundits proposed that the data could serve as proof to China's policymakers that measures are needed to energize the country's economy," Briefing.com analysts said.
The Institute of Supply Management reported slowing growth in the US manufacturing sector in October: its PMI index reading slipped to 50.8% from 51.6% in September.
Financials were pummeled for the second straight day under renewed Europe fears. Citigroup shed 9.8%, Goldman Sachs lost 5.5% and Morgan Stanley dived 8.0%.
Bank of America lost 6.3%, with shares also under pressure from news it was dropping a plan to charge customers for debit card usage.
Pfizer was the only member of the 30-stock Dow to close in positive territory, up 0.4% to $19.33. The pharmaceuticals giant raised its full-year earnings outlook after posting stronger-than-expected third-quarter profit.
Yahoo fell 4.5% to $14.93 after saying it is buying internet advertising company Interclick in a deal worth $270m.
General Motors plunged 9.8% after reporting auto sales rose two percent in October. Ford Motor, which posted a 6.2% sales gain, fell 5.1%.
The bond market sharply rallied. The yield on the 10-year Treasury fell to 2.00% from 2.18% late on Monday, while that on the 30-year Treasury slid to 3.00% from 3.20%.
Bond yields and prices move in opposite directions.
