* Top German to quit ECB over bond-buying row
* Obama's $447 billion jobs plan faces uphill battle
* Bank of America discussing about 40,000 job cuts
* Indexes down: Dow 3 pct, S&P 2.9 pct, Nasdaq 2.8 pct
* For up-to-the-minute market news see [STXNEWS/US] (Updates to late-afternoon trade)
By Edward Krudy
NEW YORK, Sept 9 (Reuters) - U.S. stocks tumbled on Friday after the top German official at the European Central Bank resigned in protest of the bank's bond-buying program, which has been a major tool in fighting the region's debt crisis.
The resignation of Juergen Stark, who will step down from the ECB by the end of the year, comes as investors are looking for leadership from policy makers around the globe as fears of a new recession engulf global markets.
Doubts about President Barack Obama's $447 billion stimulus proposal added to the negative sentiment, with investors unconvinced his administration has the tools to revive the flagging U.S. economy.
The sell-off was broad, with all 10 S&P sectors in the red and 80 percent of stocks listed on the New York Stock Exchange falling. The VIX volatility index <.VIX>, a measure of expected market turbulence, leapt 18 percent to over 40 -- close to its highest level this year.
"The ECB is critical in dealing with and potentially solving the sovereign debt issue, so when you get a new story like this, that there's internal turmoil in the ECB, that immediately has implications for the bond-buying program, which immediately has implications on the capital level in European banks," said Jack de Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire.
The ECB has been buying up sovereign bonds to help hold down borrowing costs in some debt-strapped euro zone members, and the program has been considered critical to arresting market contagion. [ID:nL5E7K91CF]
Unnerving traders further were unconfirmed terrorism threats against New York City and Washington just ahead of the 10th anniversary of the September 11, attacks.
The Dow Jones industrial average <.DJI> dropped 341.14 points, or 3.02 percent, to 10,954.67. The Standard & Poor's 500 Index <.SPX> fell 35.14 points, or 2.96 percent, to 1,150.76. The Nasdaq Composite Index <.IXIC> lost 71.42 points, or 2.82 percent, to 2,457.72.
The S&P 500 was on track to end the week more than 1 percent lower and is now down 8.2 percent this year.
"There is an extreme amount of negativity," said Sam Ginzburg, a senior trader at First New York Securities.
Shares of some big companies fell after Obama's speech did not address proposals to allow large, multinational companies to repatriate an estimated $1.5 trillion of overseas profits to the United States at a reduced tax rate.
"These are software companies, pharma companies that have billion of dollars stranded overseas," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "It's a disappointment that we didn't see a definitive package on bringing those profits back home."
Among stocks that would benefit from such a move, Xerox
Corp
At a meeting of finance chiefs from the Group of Seven wealthy nations being held in France, U.S. Treasury Secretary Timothy Geithner on Friday pressed Europe's strongest economies to give "unequivocal" financial support to weaker euro zone states to overcome a debt crisis that threatens the world economy.
Bank of America Corp
Shares of Bank of America, a Dow component that earlier this week announced a far-reaching reorganization of senior management, slid 2.8 percent to $7.
McDonald's Corp