Wall Street bled a sea of red on Friday, with the S&P 500 sinking to its lowest level since October 2014 and the Dow losing more than 500 points as oil prices sank below $30 per barrel.

Pain was felt across the board. All 10 major S&P sectors were deep in the red and all 30 Dow components lost ground. The Russell 2000 small-cap index fell as much as 3.5 percent to its lowest level since July 2013.

The energy sector, already in a deep slump, dropped 2.65 percent as oil prices fell 6.5 percent on fears of slow economic growth in China, the world's second largest economy.

The technology sector was the day's biggest loser, sliding 2.83 percent as weak quarterly results from Intel, the world's largest semiconductor maker, weighed heavily on chip stocks.

"Investors are scared to death, and the fact that it's happening at the beginning of the year has some historical significance," said Phil Orlando, chief equity market strategist at Federated Investors in New York.

At 2:59 p.m. the Dow Jones industrial average was down 2.18 percent at 16,021.26 and the S&P 500 was down 1.97 percent to 1,884.04. The Nasdaq Composite lost 2.58 percent to 4,495.96.

The S&P 500 has fallen around 13 percent and the Dow 14 percent from their highs in May, pushing them into what is generally considered "correction territory."

The CBOE volatility index jumped as much as 29.2 percent to 30.95, its highest level since September.

U.S. economic data on Friday was also not very encouraging, with an unexpected drop in retail sales and industrial output declining again in December, underscoring a worsening outlook for fourth-quarter economic growth.

Declining industrial production, a slowdown in container ship traffic between the United States and Europe and the loss of high-paying jobs in oil fields should all continue to push the broad stock market lower, said David James, a portfolio manager at Alpha, Ohio-based James Advantage Funds, who oversees approximately $6 billion in assets.

Dow components Exxon and Chevron were down more than 1 percent, while Caterpillar dropped 2.5 percent.

Intel tumbled 10 percent, its steepest drop in seven years, after the chipmaker's results and forecast raised concerns about its growth.

Citigroup fell 6.05 percent, while Wells Fargo dropped 3.6 percent after both reported largely in-line quarterly earnings.

Wynn Resorts was the among the few bright spots, surging 13.9 percent after reporting in-line quarterly revenue.

Declining issues outnumbered advancing ones on the NYSE by 2,677 to 421. On the Nasdaq, 2,380 issues fell and 469 rose.

The S&P 500 index showed no new 52-week highs and 135 new lows, while the Nasdaq recorded five new highs and 493 lows.