Dow sinks 250 points, oil dives to 7-year low

Three ways to make money this year
Three ways to make money this year

The scary headlines keep on coming for investors.

Wall Street experienced another mini panic attack on Wednesday after North Korea claimed to successfully test a hydrogen bomb. The markets were already being spooked by the financial and economic turbulence out of China and the latest plunge in oil prices below $34 a barrel.

The Dow dropped 252 points, closing below 17,000 for the first time since mid-October. The S&P 500 fell 1.3% and the Nasdaq lost 1.1%.

It marks the Dow's worst start to a trading year through three days since 2008. The index also fell 276 points on Monday due to worries about China.

"Quite suddenly there seems to be a very long list of topics that represent game-changing risks to the market. North Korea is just one more factor," said Peter Kenny, an independent market strategist and founder of Kenny's Commentary.

The latest selloff began overnight after North Korea claimed it carried out its first hydrogen bomb test. U.S. officials told CNN it could take days to determine if North Korea's claims are legitimate. If true, the test would represent a major advancement by the North Korean regime and the latest geopolitical threat on top of the tensions between Saudi Arabia and Iran.

Stocks in Asia retreated and the South Korean won slumped over 1% against the U.S. dollar. Gold, which tends to rise during times of fear, jumped 1.4% to $1,093 an ounce.

"While the long-term investment implications are likely to be limited (as Pyongyang's previous nuclear tests have proven), the short-term impact will likely keep markets extra jittery," Win Thin, global head of emerging market currency strategy at Brown Brothers Harriman, wrote in a client note.

Related: Should investors worry about North Korea?

Oil prices also took another hit on Wednesday. Crude plunged nearly 6% to $33.97 a barrel -- the lowest settle since 2008. The latest losses were triggered by concerns about demand from China, the strong U.S. dollar and the diminishing chances OPEC cuts production.

Worries about China also continue to ripple through the U.S. stock market. A new report released on Wednesday that showed the country's services sector grew at the weakest pace in 17 months in December.

China also continues to experience financial turbulence. Its stock market jumped 2% on Wednesday, rebounding from Monday's crash thanks to more efforts by the government to stabilize markets.

However, China's currency lost more ground and is now down about 1% against the U.S. dollar this year. The yuan's fall will likely cause more money to leave China and "creates havoc" for other manufacturing countries in the region, said Peter Boockvar, chief market analyst at The Lindsey Group.

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