The S&P 500 is down 74.18 points, or 2.5%.
The average monthly job growth for the past three months also fell to 145,000 from 214,000 for the same time period a year ago, ADP said. Those fears increased bets that the Federal Reserve will cut rates this month.
Investors seeking shelter piled money into government bonds, sending yields lower. The Fed hasn't cut rates by that large a margin since the financial system was melting down in 2008.
Meanwhile, meager returns world-wide - as the pile of negatively yielding debt swelled to more than $15 trillion - led investors to keep buying stocks. Last month, the central bank cut rates for the second time in 2019. Both the S&P 500 and Nasdaq were slightly higher following the early rout.
At 9:38 a.m. ET, the Dow Jones Industrial Average was down 22.96 points, or 0.09%, at 26,055.66, the S&P 500 was up 1.15 points, or 0.04%, at 2,888.76. The Nasdaq Composite was down 106.61 points, or 1.35%, at 7,802.07.
Losses on the stock market are accelerating in midday trading as new signs of economic weakness and looming trade frictions spook already nervous investors.
But it's been a wild ride along the way. The Dow ended the day down 494.42 points, or 1.9 percent, to 26,078.62.
What's the biggest concern for markets right now?
Further signs of weakness in the U.S. economy may prompt the Federal Reserve to lower interest rates again at its next meeting in late October following two back-to-back quarter percentage point cuts in August and September, which were the first easings in monetary policy by the Fed in over a decade. Currencies have also logged big moves, with the yuan dropping almost 4% against the dollar this quarter, its weakest run since the second quarter of 2018.
With the trade between the USA and China still taking place, and additional tariffs set to go into effect in both October and December, there is a growing fear of a possible recession.
The duo of weak readouts led to a resurgence of concern on Wednesday that the US economy could be bound for a slowdown as the US-China trade war weighs on producers.
The Bloomberg Dollar Spot Index declined 0.3 per cent. If the U.S.jobs market slows, it would remove support from one of the main pillars propping up the economy: strong spending by households. The conflict started a year ago.
President Donald Trump blamed the Democrats for the market sell-off, tweeting that "impeachment nonsense" was driving down "the Inventory Market, and your 401Ok's". USA leaders will also meet with Chinese counterparts to discuss trade in October, and some investors are on edge for signs of a trade truce.
Bank stocks suffered losses as bond yields slumped.
Elsewhere, the pound rallied, while the yen continued to strengthen along with gold.
The industrial and materials sectors dropped about 1.5 percent each, posting the biggest declines among the 11 major S&P sectors.
Utility stocks also fell, but by less than the rest of the market as the dividends they pay looked more attractive.
"I think yesterday's USA manufacturing PMI report was a game changer", said Fawad Razaqzada, technical analyst at Forex.com, in emailed comments. "Never in my 25 years of doing this has so much seemingly revolved around what will happen from a political perspective each and every day".
"There's always uncertainty", said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management.
Paul J. Davies contributed to this article.