NEW YORK, Oct 9 (Reuters) - U.S. stocks slid on Thursday, erasing the previous session's sharp rally, on lingering concern about the strength of the global economy and after a Federal Reserve official said market views on rate hikes are at odds with the central bank's.
German exports slumped by 5.8 percent in August, the biggest drop since January 2009, following data earlier this week that showed industrial orders and output suffered their steepest drops in more than five years.
St. Louis Federal Reserve Bank President James Bullard said the disconnect between the market's view on the Fed's rate hike path and its own view is concerning.
"The markets are making a mistake," said Bullard, a non-voting member of the FOMC who is however seen by investors as a bellwether among Fed officials.
Views that the Fed was more dovish, and rates would remain low longer than anticipated, were behind the market's sharp rally on Wednesday.
"Investors have been conditioned to buy the dip but Fed policy is in transition," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.
She said the data out of Germany was especially important for large caps, and earnings and fourth-quarter forecasts will be key to determining the medium-term market direction.
"Investors want to be convinced by companies that share prices are commensurate with growth," she said.
Energy shares were by far the weakest on the day, dropping 3 percent in their biggest one-day decline since April 2013. U.S. crude oil prices lost 1.7 percent to $85.81 per barrel.
The materials sector fell 2.1 percent.
At 2:14 p.m. EDT (1814 GMT) the Dow Jones industrial average fell 311.36 points, or 1.83 percent, to 16,682.86, the S&P 500 lost 36.67 points, or 1.86 percent, to 1,932.22 and the Nasdaq Composite dropped 82.95 points, or 1.86 percent, to 4,385.64.
The Russell 2000 fell 24.14 points, or 2.2 percent.
The largest percentage gainer on the S&P 500 was Vornado Realty, which rose 1.3 percent, while the largest percentage decliner was Gap Inc, down 11.9 percent.
On the Nasdaq 100, the largest gainer was Ross Stores , which was up 0.1 percent, while the largest percentage decliner was Vodafone, down 5.5 percent.
Declining issues outnumbered advancing ones on the NYSE by 2,613 to 412, for a 6.34-to-1 ratio on the downside; on the Nasdaq, 2,218 issues fell and 427 advanced for a 5.19-to-1 ratio favoring decliners.
The benchmark S&P 500 index posted 21 new 52-week highs and 15 new lows; the Nasdaq Composite recorded 22 new highs and 173 new lows. (Reporting by Rodrigo Campos; Editing by Nick Zieminski)