U.S. stocks were hammered on Monday, with benchmark indexes falling through key support levels after a gauge of factory activity disappointed, heightening concern about the economy before Friday's monthly jobs report.
(Read more: Wall Street to eye more factory data on Tuesday)
Stocks had wavered ahead of the report that had U.S. manufacturing expanding at a substantially slower pace in January, driving overall factory activity to an eight-month low.
"A report like this scares people ahead of the payroll number on Friday," said Andres Garcia-Amaya, global market strategist at J.P. Morgan Funds, who added the report's soft new orders component was of particular concern.
"We had such a strong year last year there was complacency among investors," who questioned whether they should take some profits or see if there were further reasons to invest in the U.S., with the trouble in emerging markets proving to be the initial catalyst for the steep selling in recent sessions, he added.
(See why: Bank of America pro believes the market dive is a 'high-quality' buying opportunity)
Monday's selling accelerated once stocks broke through support levels, which in the case of the S&P 500, was 1,770, wrote Bruce Bittles, chief investment strategist at RW Baird. The S&P's next support is 1,708, said Bittles, who believes the final hour of trade will be telling.
"The significance of the ISM report is not lost on the markets that are unsure how the new Fed chair will respond. Janet Yellen comes before Congress on Feb. 11," he added.
Major U.S. Indexes
Dropping below its 200-day moving average for the first time since Dec. 28, 2012, the Dow Jones Industrial Average shed 326.05 points, or 2.1 percent, to 15,372.80, with all but one of its 30 components in the red.
(What's a market correction? CNBC explains.)
The fell 40.70 points, or 2.3 percent, to 1,741.89, with telecommunications falling hardest and all 10 of its major groups in decline.
Falling under 4,000, the Nasdaq declined 106.92 points, or 2.6 percent, to 3,996.96.
(Read more: The VIX is surging on market fear, but not loathing.)
For every share rising, more than six fell on the New York Stock Exchange, where almost 872 million shares traded hands. Composite volume neared 4.7 billion.
Illustrating investor uncertainty, the CBOE Volatility Index, or VIX, jumped nearly 15 percent to 21.12, its first rise above 20 since October.
The dollar edged lower against other global currencies and the yield on the 10-year Treasury note fell to a three-month low, lately off 7 basis points at 2.58 percent.
Crude futures fell $1.06 to $96.43 a barrel; gold futures jumped $20.10, or 1.6 percent, to $1,259.90 an ounce.
On Friday, U.S. stocks closed steeply under water, with Wall Street recording its worst month in more than a year and first monthly loss since August, as investors compiled a list of worries that now include emerging markets.
—By CNBC's Kate Gibson
More From CNBC.com: