The tough day follows declines in U.S. markets last week, when the three major indexes fell more than 2 percent as a number of big companies reported disappointing earnings.
Faced with a drop in stock prices in Asia, Europe and the U.S., investors moved into traditional safe havens. The yield on the 10-year U.S. Treasury note fell to 2.22 percent from 2.26 percent on Friday. The price of gold rose 1 percent.
The Dow Jones industrial average lost 127.94 points, or 0.7 percent, to 17,440.59. The Standard & Poor’s 500 index lost 12.01 points, or 0.6 percent, to 2,067.64 and the Nasdaq composite lost 48.85 points, or 1 percent, to 5,039.78.
It was the fifth straight loss for the U.S. market. The S&P 500 is still up about half a percent for the year. The Dow is down 2 percent and the tech-heavy Nasdaq is up 6 percent.
The worries for investors this week started with an 8.5 percentage point plunge on the Shanghai market, the biggest one-day decline since February 2007. It was the latest big drop in the Chinese stock market, which has slumped since early June.
There are now concerns the 30 percent decline in the stock market is starting to do damage to China’s economy. A closely watched Chinese purchasing manager’s index fell to a 15-month low over the weekend, with analysts blaming the drop partly on the market.
The Chinese sell-off ruffled other markets in Asia, though the scant amount of foreign investment in Chinese shares limits the ripple effects outside of Hong Kong, a semiautonomous Chinese territory that is also a financial center.
Hong Kong’s Hang Seng shed 3.1 percent and Japan’s Nikkei 225 dropped 1 percent. South Korea’s Kospi fell 0.4 percent.
In Europe, which has already had a volatile summer because of worries about Greece’s precarious finances, also fell broadly on Monday.
The Euro STOXX 50 index, the European equivalent of the Dow 30, fell 2.4 percent. Germany’s DAX lost 2.6 percent, France’s CAC-40 lost 2.6 percent and the U.K.’s FTSE 100 lost 1.1 percent.
Elsewhere, traders were turning their attention to the Federal Reserve as they try to assess when the central bank will start raising interest rates. The market appears split between those who think it will happen in September or December.
Traders also have the busiest week for second-quarter earnings reports this week, with 174 members of the S&P 500 as well as six members of the Dow average reporting their results.
The price of oil fell to the lowest point since March as another steep drop in Chinese stocks caused concerns that demand from the world’s second biggest oil consumer would slip. Benchmark U.S. crude fell 75 cents to close at $47.39 a barrel in New York. Brent crude, a benchmark for international oils used by many U.S. refineries, fell $1.15 to close at $53.47 a barrel in London.
In other futures trading on the New York Mercantile Exchange:
- Wholesale gasoline fell 0.8 cent to close at $1.820 a gallon.
- Heating oil fell 3.4 cents to close at $1.596 a gallon.
- Natural gas rose 1.3 cents to close at $2.789 per 1,000 cubic feet.