The Dow Jones industrial average briefly plunged nearly 1,600 points Monday as two days of steep losses for U.S. stocks brought an end to a period of record-setting calm in the market.
The Dow recouped about half that loss within minutes, but its gains for the year were still gone as of late afternoon.
The slump began on Friday as investors worried that creeping signs of higher inflation and interest rates could derail the U.S. economy along with the market's record-setting rally. Energy companies, banks, and industrial firms are taking some of the worst losses.
As of 3:40 p.m. Eastern time the Dow was down 950 points. That put it on pace for its largest loss in point terms: Its biggest point loss was a 777-point drop in September 2008 as the global economic crisis took hold.
Monday's decline brought the Dow down 3.8 percent to 24,547.
The Standard & Poor's 500 index, the benchmark most professional investors use, lost 73 points, or 2.7 percent, to 2,686, on track for its biggest loss since June 2016. The Nasdaq composite fell 181 points, or 2.5 percent, to 7,059. The Russell 2000 index of smaller-company stocks was down 39 points, or 2.5 percent, to 1,507.
The S&P 500 is now down 6.7 percent from its latest record high, set January 26. Investors are worried about evidence of rising inflation in the U.S. Increased inflation might push the Federal Reserve to raise interest rates more quickly, which could slow down economic growth by making it make it more expensive for people and businesses to borrow money. And bond yields haven't been this high in years. That's making bonds more appealing to investors compared with stocks.
The stock market has been unusually calm for more than a year. The combination of economic growth in the U.S. and other major economies, low interest rates, and support from central banks meant stocks could keep rising steadily without a lot of bumps along the way. Experts have been warning that that wouldn't last forever.
David Kelly, the chief global strategist for JPMorgan Asset Management, said the signs of inflation and rising rates are not as bad as they looked, but after the market's big gains in 2017 and early 2018, stocks were overdue for a drop.
"It's like a kid at a child's party who, after an afternoon of cake and ice cream, eats one more cookie and that puts them over the edge," he said.
As bad as Monday's drop is, the market saw worse days during the financial crisis. The Dow's 777-point plunge in September 2008 was equivalent to 7 percent, about twice as big as Monday's decline.
Stocks haven't suffered a 5 percent drop since the two days after Britain voted to leave the European Union in June 2016. They recovered those losses within days.
The market hasn't gone through a 10 percent drop since early 2016, when oil prices were plunging as investors worried about a drop in global growth, which could have sharply reduced demand. U.S. crude hit a low of about $26 a barrel in February of that year.
Wells Fargo sank $5.71, or 8.9 percent, to $58.36. Late Friday the Fed said it will freeze Wells Fargo's assets at the level where they stood at the end of last year until it can demonstrate improved internal controls. The San Francisco bank also agreed to remove four directors from its board.
Benchmark U.S. crude oil fell $1.30, or 2 percent, to $64.15 a barrel in New York. Brent crude, the standard for international oil prices, lost 96 cents, or 1.4 percent, to $67.62 a barrel in London.
Exxon Mobil lost $4.56, or 5.4 percent, to $79.97 and Chevron gave up $5.62, or 4.7 percent, to $112.96. Both companies reported disappointing fourth-quarter results on Friday and are coming off their biggest losses in years.
Bond prices tumbled after moving sharply higher on Friday. The yield on the 10-year Treasury slipped to 2.75 percent from 2.84 percent. That hurt banks by sending interest rates lower, which means banks can't charge as much money for mortgages and other types of loans.
The dollar fell to 109.70 yen from 110.28 yen. The euro slipped to $1.2399 from $1.2451.
Gold declined 80 cents to $1,336.50 an ounce. Silver dipped 4 cents to $16.67 an ounce. Copper rose 3 cents to $3.22 a pound.
Bitcoin prices continued to sink. According to Coindesk, the price of bitcoin fell 15 percent to $6,957. It reached a high of almost $20,000 in December, and traded under $1,000 in early 2017. Many financial pros warn that bitcoin is in a speculative bubble that could burst anytime. On the CME, bitcoin futures plunged 19 percent to $6,975. They tumbled 18 percent to $6,950 on the Cboe.
Stocks in Europe also fell. Leading political parties in Germany, which is the largest economy in Europe, have struggled to form a government. Chancellor Angela Merkel's conservative Union bloc and the center-left Social Democrats are still in talks about extending their alliance of the past four years.
Britain's FTSE 100 lost 1.5 percent while France's CAC 40 slid 1.5 percent. The DAX in Germany shed 0.8 percent.
Japan's benchmark Nikkei 225 tumbled 2.6 percent and the South Korean Kospi shed 1.3 percent. Hong Kong's Hang Seng index sank 1.1 percent.
AP Markets Writer Marley Jay can be reached at http://twitter.com/MarleyJayAP His work can be found at https://apnews.com/search/marley%20jayt