Investors even managed to push the index into positive territory briefly in the afternoon.
The blue chip index is now down about 400 points, or 3.2 per cent, from its closing level on Monday.
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The Institute for Supply Management's index of February manufacturing activity came in at 52.3, stronger than the 50 reading analysts expected.
The index is an important measure of a part of the economy that has given investors headaches in recent months.
Manufacturing had contracted a month earlier, according to the index, suffering from the listless housing market and auto industry.
A reading at 50 and above indicates expansion, while anything below 50 signals contraction.
Broader stock indicators also ended down after fluctuating in the afternoon. The Standard & Poor's 500 index fell 3.65, or 0.26 per cent, to 1,403.17, after tumbling 26 points earlier in the day.
The technology-dominated Nasdaq composite index finished down 11.94, or 0.49 per cent, at 2,404.21, following an earlier drop of 56 points.
Stocks plunged on Tuesday amid escalating worries that the US and Chinese economies are slowing, exacerbated by a huge decline in Chinese stocks and comments from Alan Greenspan, the former Federal Reserve chairman that a US recession is still a possibility.
Investors remain nervous and many bailed out of equities, betting that stocks could see a bigger correction.
Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners, said "the aftermath of Tuesday's major sell-off will linger for the next couple of days".
"I don't think we're totally out of the woods yet."