Fears the world is on the verge of another recession worried investors, sparking sharp sell-offs in stock markets from New York to Hong Kong.

The major U.S. stock indexes all plunged more than 3 percent Thursday, with the broad-based S&P index of 500 companies retreating to its lowest point of the year.

The second straight day of declines followed a warning from the U.S. central bank late Wednesday that it sees “significant downside risks” to the country's already struggling economy.

That assessment from the Federal Reserve sent Asian markets tumbling, with the sell-off quickly sparking even bigger losses on key European exchanges in London, Paris and Frankfurt, where investors also fear a possible Greek debt default.

At one point Thursday, the closely watched Dow Jones Industrial Average of 30 key stocks on Wall Street was down around 500 points from Wednesday's close.

Prices for commodities also fell, with oil sliding nearly 5 percent on worries there would be less demand with a global economic downturn. Even the price of gold, often viewed as a haven for investors, dropped, but U.S. bonds were still viewed favorably as a protected investment.

The managing director of the International Monetary Fund, Christine Lagarde, said the world's biggest economies need to strengthen their collective efforts to restore stability to world financial markets. She said that global leaders have not exhibited the same sense of momentum and spirit to resolve economic difficulties as they did at the height of the recent recession.

Lagarde said the risk against global economic growth has “increased markedly,” but added that so far world financial markets have ignored “bold” corrective efforts taken by European countries to cut their government debt.

On Wednesday, the U.S. Federal Reserve said a complete economic recovery is years away, and announced a plan to sell $400 billion of short-term bonds and buy long-term Treasury notes in an effort to keep interest rates low and boost economic growth. The central bank's action had been expected.

Analysts said that the gloomy forecast for the U.S. economy, coupled with worries that Greece may eventually default on its international bailout loans, could lead to a new global downturn or at best continued sluggish growth.