Wall Street rode another wave of selling Monday that sent U.S. stocks sharply lower, before a late-afternoon pullback stemmed some of the losses.
Investors unloaded materials, financials and other stocks, briefly knocking the Dow Jones industrial average down more than 400 points.
Technology shares, which soared last year, were targeted for especially aggressive selling, bringing the tech-heavy Nasdaq composite index down almost 20 percent from its record high last year.
The losses left major market indexes down for the second day in a row, extending what has been a dismal beginning of 2016 for the stock market, its worst start to a year on record.
European markets also fell sharply, with the worst losses coming in weaker economies such as Greece, Spain, and Italy. Traditional safe harbor investments like gold and U.S. government bonds were among the few bright spots in a market awash in red.
"Traders are worried that the financial market weakness that we're experiencing is going to lead to weakness in the real economy," said Jim McDonald, chief investment strategist at Northern Trust.
The Dow fell 177.92 points, or 1.1 percent, to 16,027.05. The Standard & Poor's 500 lost 26.61 points, or 1.4 percent, to 1,853.44. The Nasdaq composite dropped 79.39 points, or 1.8 percent, to 4,283.75. The index is within 110 points of being in what Wall Street considers a bear market, or a 20 percent drop from its high.
For the year, the Dow is now down 8 percent, while the S&P 500 is down 9.3 percent. The Nasdaq has lost 14.5 percent this year.
The stock market has been in a slump for much of this year after a lackluster 2015. Several factors have kept investors in a selling mood, including falling crude oil prices, the impact of a stronger dollar on U.S. company earnings, and heightened concern that economic growth is slowing in China and elsewhere.
Fears of a global economic downturn are now heightening concerns that the U.S. economy could slide into a recession later this year.
The market anxiety helped push bond prices higher, pulling down the yield on the 10-year Treasury note to 1.75 percent from 1.84 percent late Friday, a large move.
Investors looking for some positive outlooks for 2016 aren't finding much in the latest wave of company earnings, either.
Many of the companies that have reported quarterly results in recent weeks also gave weak earnings outlooks for this year, noted Bill Northey, chief investment officer at the Private Client Group at U.S. Bank.
"In fact, we're now looking at growth estimates that are sub-5 percent for 2016, which is down rather materially from where we came into fourth-quarter earnings season," Northey said.
Benchmark U.S. crude oil fell $1.20, or 3.9 percent, to close at $29.69 a barrel in New York. Brent crude, a benchmark for international oils, dropped $1.18, or 3.5 percent, to close at $32.88 a barrel in London.
The prolonged slump in oil prices has investors worried that companies that drill for crude may not be able to pay back their loans.
Speculation that Chesapeake Energy might be preparing to file for bankruptcy protection helped push its stock price down 33 percent on Monday, making it one of the worst performers in the S&P 500 index.
In response, the company issued a statement around midday saying it "currently has no plans to pursue bankruptcy." The stock closed down $1.02 to $2.04 in heavy trading.
Traders also sold fellow driller Williams Cos., which lost $5.96, or 34.8 percent, to $11.16.
Despite the latest drop in crude oil prices, the S&P 500 index's energy sector ended slightly higher. The other nine sectors declined, with materials stocks shedding the most, 2.7 percent.
Financials stocks also slumped, falling 2.6 percent.
Given the jitters over a possible global economic slowdown, investors are betting that the Federal Reserve will be less aggressive about raising its key interest rate further this year. Going into 2016, many on Wall Street were projecting as many as four rate hikes by the Fed this year. Higher interest rates benefit banks, which make money from interest on credit cards and other loans.
Goldman Sachs Group was one of the biggest decliners in the Dow, sliding $7.22, or 4.6 percent, to $149.25. Bank of America shed 68 cents, or 5.3 percent, to $12.27.
Credit Suisse Group AG fell 4 percent on news that the bank's new CEO has asked for his bonus to be cut following a report of a huge fourth-quarter loss and plans for 4,000 job cuts. The stock fell 54 cents to $14.44.
Federal Reserve Chair Janet Yellen is scheduled to deliver a policy update to Congress later this week.
"What the market wants to see is the Fed realizing that there's no way on Earth they can raise rates three to four times in the next 12 months," McDonald said.
Monday's market slump followed a wave of selling in Europe that was concentrated in the more financially shaky countries. The stock index in Spain was off roughly 4 percent, while Italy's lost about 5 percent. Greece's index sank about 8 percent.
The larger stock markets didn't fare much better.
Germany's DAX fell 3.3 percent, while France's CAC 40 dropped 3.2 percent. The FTSE 100 index of leading British shares slid 2.7 percent.
In Asia, many markets were closed for the Lunar New Year holidays. Japan's benchmark Nikkei 225 rose 1.1 percent, while Australia's S&P/ASX 200 was flat.
Precious metals prices rose sharply as traders took cover from the turbulence in the stock market.
Gold jumped $40.20, or 3.5 percent, to $1,197.90 an ounce and silver climbed 64.8 cents, or 4.4 percent, to $15.43 an ounce. Copper, an industrial metal that will often rise and fall along with investor's optimism about the global economy, slipped 1.3 cents to $2.09 a pound.
In other energy trading in New York, wholesale gasoline fell 3.7 cents, or 3.7 percent, to 95.61 cents a gallon and home heating oil fell 1.3 cents to $1.046 a gallon. Natural gas rose 7.7 cents, or 3.7 percent, to $2.14 per 1,000 cubic feet.