Dow Falls More Than 1,000+ Points; Largest One-Day Drop In Market History

NEW YORK (CNN Money) - The markets plunged Monday, with the Dow falling more than 1,100 points in the largest intraday point decline ever.

The selloff knocked the Dow down as much as 6.3 percent.

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 percent, 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.

The Dow fell 777 points on Sept. 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 percent 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 percent, 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 five percent 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 one percent in Hong Kong, 1.5 percent in the U.K. and 2.5 percent 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.

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 percent on Friday. It's a dramatic swing from 2.4 percent 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 three percent pullback. Now the S&P 500's record-long period without a five percent retreat is in jeopardy.

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 percent 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 percent -- 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 percent after unprecedented sanctions were handed down by the Fed late Friday.

- By Matt Egan

CNN's Liz Landers contributed to this report.

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