The markets plunged Monday, with the Dow falling nearly 1,600 points in the largest intraday point decline ever.
The selloff knocked the Dow down as much as 6.3%.
At its worst levels, the Dow has fallen 2,200 points over the past two sessions.
Stocks gyrated wildly throughout the day. The Dow was down about 950 points, or 3.75%, minutes market close.
Market volatility emerged last week as investors grew more worried about turmoil in the bond market caused by inflation concerns.
The plunge sent the Dow below 24,000. It hasn't closed below that level since November 29.
If the decline holds, it will be the worst single-day point decline in Dow history. The Dow fell 777 points on September 29, 2008.
It will also be the first two-day drop totaling 1,000 points for the Dow since August 2015, when investors were worried about the Chinese economy. The Dow was much lower then, so the decline was significantly worse in percentage terms.
The Nasdaq slumped more than 2% on Monday, quickly turned positive, then sank again.
Analysts said there weren't any new developments that led to the extreme selling on Monday. Instead, they blamed continued fears about inflation and spiking bond yields.
"People are dealing with the shock of seeing real inflation for the first time in a while," said Bruce McCain, chief investment strategist at Key Private Bank.
The recent plunge has pushed stocks closer to what's called a correction, or a 10% decline from its most recent high point.
"The stock market is throwing a tantrum," said Andres Garcia-Amaya, CEO of wealth management firm Zoe Financial.
"Take a deep breath," said Garcia-Amaya. "I know it's been a while since we had a day like today, but nothing has really changed from a fundamental standpoint."
The market started 2018 with a bang, but last week was the worst on Wall Street in two years. The selling gathered steam on Friday when the Dow plunged 666 points, or 2.5%, its worst day since the Brexit mayhem of June 2016. Nearly $1 trillion of market value was erased from the S&P 500 last week.
"You had a market that was overbought and ripe for something to undermine its tranquility," said Mark Luschini, chief investment strategist at Janney Capital.
The S&P 500 is down about 5% from its all-time high, signaling what analysts call a pullback.
The turbulence on Wall Street led a White House spokesman to say aboard Air Force One on Monday that "markets do fluctuate in the short term." He added, "the fundamentals of the economy are very strong" and cited historically low unemployment.
The nervousness spread to overseas markets. Major indexes fell 1% in Hong Kong, 1.5% in the U.K. and 2.5% in Japan.
CNNMoney's Fear & Greed Index is flashing "fear," underlining a major shift in market sentiment from a week ago when it was sitting in "extreme greed." The VIX volatility index surged 47% on Monday after spiking 50% last week.
The Russell 2000, an index of smaller stocks that have heavy exposure to the U.S. economy, turned negative for 2018 for the first time.
"Valuations got stretched and that led to a cascading effect today," said Sam Stovall, chief investment strategist at CFRA Research. "The market has to correct itself -- a resetting of the dials -- before this bull market can continue.
Related: Good news for Main Street is freaking out Wall Street
Investors' main concern is the selloff in the bond market. The 10-year Treasury yield, which moves opposite price, spiked to a four-year high of 2.85% on Friday. It's a dramatic swing from 2.4% at the start of 2018. Higher yields could make normally boring bonds look more attractive when compared with risky stocks.
The U.S. economy looks very healthy. Friday's jobs report showed that wages grew at the fastest pace since 2009. That's a welcome shift by workers who have been dealing with anemic raises for years.
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However, Wall Street is starting to get worried that the "goldilocks" environment of slow growth and mysteriously low inflation may be ending. Stronger inflation would force the Federal Reserve to raise rates more aggressively than investors may be comfortable with. And more robust wage gains could eat into record-high corporate profits.
No matter the cause, the stock market was long overdue to take a breather. Before Friday, the S&P 500 had gone the longest stretch ever without a 3% pullback. Now the S&P 500's record-long period without a 5% retreat is in jeopardy.
Related: This is why the Dow is plunging
While they can be scary, market pullbacks prevent stocks from overheating and give investors who were stuck on the sideline a chance to get in. Janet Yellen, who just stepped down as Fed chief, told PBS on Friday that she still believes "asset valuations generally are elevated."
Despite the recent turmoil, the Dow remains up almost 40% since President Trump's election. The robust performance has been driven by strong corporate profits, healthy economic growth and excitement about the Republican tax cut for businesses.
Analysts at Bespoke Investment Group urged calm.
"Take a deep breath," the firm wrote in a research note on Friday. "For those investors that may have forgotten, this is what a market decline feels like."
The question is whether the market retreat deepens or whether investors buy at the dip, a mentality that has supported stocks for months.
"The fundamentals of the economy remain quite strong," said Janney's Luchini. "It's hard to make the case for why we should be down more than 10% -- unless we encounter negative economic news."
Key Bank's McCain agrees. "We believe this is not the beginning of the end and a tilt towards a bear market. It's premature for that," he said.
Wells Fargo suffered some of the worst of the selling on Monday. The No. 2 U.S. bank plunged 9% after unprecedented sanctions were handed down by the Fed late Friday.
--CNN's Liz Landers contributed to this report.
Image copyright Getty Images
The Dow Jones Industrial Average has fallen by 500 points in a day of volatile trading that has rattled global markets.
The leading US stock market is down 1.99% or 427.58 points to 25,012.47.
It was closely followed by the wider S&P 500 stock index and the technology-heavy Nasdaq.
The falls began on Friday when strong wage growth data raised the prospect of accelerated interest rate rises.
London's main share index, the FTSE 100, closed down 1.46% while earlier, the biggest markets in Asia fell between 1% and 2.5%.
The decline followed months of market increases, which had fuelled concerns that share prices were over valued.
David Madden, market analyst at CMC Markets, said: "Equity traders were enjoying a bullish run recently, and the jolt from the major decline in the US last Friday has triggered a worldwide round of profit taking."
US shares suffer sharpest drop since 2016
The Dow Jones rose more than 25% in 2017 - a year which was also unusual for its lack of sharp moves.
"There is going to be more volatility this year, " Andrew Wilson chief executive of Goldman Sachs Asset Management, told the BBC.
"We are in a cycle where central banks are reducing the amount of bonds they are buying and some central banks putting up interest rates," he said.
On Friday there was a hefty 4% loss for shares in Apple, which had been one of the markets' star performers in recent years.
That selling came despite a solid trading update from the company.
The cost of oil has plummeted after the Dow Jones fell 1,000 points
As the Dow plummeted oil prices were lower, pressured by rising US output and other factors.
US crude fell 2.38 percent to $63.89 per barrel and Brent was last at $67.49, down 1.59 percent on the day.
Canadian crude dropped 3.57 percent to $34.27 per barrel.
West Texas Intermediate crude oil fell to $63.63 a barrel during the American session and later climbed back $64.15 per barrel on the New York Mercantile Exchange.
This is the lowest finish since January 22, according to FactSet data.
Oil prices dropped as the US benchmark dropped to the lowest settlement in two weeks.
The Dow Jones Industrial Average plunged more than 1,500 points Monday afternoon, but rebounded in about 15 minutes.
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The dramatic tumble in the market came after the Dow fell more than 600 points on Friday.
Health care, energy and financial stocks posted the largest declines. All 11 sectors of the S&P 500 were down.
The 1,500 point dive occurred around 3 p.m. Eastern Time, but by 3:30 p.m. the market seemed to pulling out of its downward spiral and had clawed its way back. It was down about 740 points with 30 minutes to go before the closing bell.
Randy Frederick, vice president of trading and derivatives for Charles Schwab, said the fall had been expected after markets hit record highs.
Frederick said the market has “been going almost straight up since the start of the year,” adding that the pullback was “expected and healthy."
“It doesn’t mean the bull market is over; it simply takes away some of the froth and irrational exuberance from stocks and puts us back on a more sustainable trendline," Frederick said.
The White House downplayed the stock market drop as a part of a normal seesaw of the market but maintained that the overall direction of the economy under President Donald Trump is strong.
"Look, markets do fluctuate in the short term. We all know that. And they do that for number of reasons," Deputy Press Secretary Raj Shah said today aboard Air Force One. "But the fundamentals of this economy are very strong and they're headed in the right direction -- for the middle class, in particular."
Shah specifically pointed to wage growth and low unemployment levels as indicators of the economy's strength.
The political challenge for the White House is trying to distance the president from a bad day on the stock market. Trump, of course, has been quick to take credit for the stock market on its good days.
