Energy, airline and materials stocks were amongst the decliners hit the hardest.
A number of investors are still concerned that Asia and European economic growth could be on the slow down and that would weigh on the economy in the U.S.
Over the last 30 minutes of trading on Monday the huge sell off capped what otherwise had been a calm day.
The late afternoon nosedive apparently set off through automated trading programs, which started to sell stock when it was clear that the S&P 500 index would close under an important level, said a Schwab analyst.
A number of traders watch the different levels for insight about the market’s near term direction.
In this particular case, the S&P 500 was closing below 1905 its moving averaging for the last 200 days. The index has traded over the moving average since November of 2012, increasing by 36%.
One analyst said the market has broken down to a point it has not been to in quite some time. The analyst predicted the market could avoid a correction or a plunge of 10% or more. However, he added that he expected this new volatility to continue for the next few weeks.
The Dow Jones lost 223 points or approximately 1.4% on the day. The S&P 500 was down by 31 points or 1.7% and the Nasdaq shed over 62 points or approximately 1.5% on the day.
The 10 sectors of the S&P 500 all fell. The biggest decliners were energy with a drop of 2.9%. Utilities, which are a safe play sector, were down the least falling only 0.1%.
The drop left the S&P 500 at only 1.4% up for 2014 and down by 6.8% for its closing peak of just recently at 2,011 on September 18.
Last Friday, the Dow went into the red for the year and is down now by 1.5% for this year and 5.5% below its peak during September.