Stocks sank broadly, triggered by disappointing results from Alcoa, and as a report by Goldman Sachs calling for a drop in commodity prices sent oil prices on a nosedive.
Among Dow components, Alcoa , Chevron and Exxon Mobil slid, while Wal-Mart gained.
The S&P 500 and the Nasdaq also fell 1 percent or more. The CBOE Volatility Index, widely considered the best gauge of fear in the market, surged above 18.
All key S&P 500 sectors declined, led by energy, materials and industrials.
Oil prices tumbled after Goldman said the oil market will experience a "substantial pullback" to $105 a barrel for London Brent crude. The benchmark had traded above $126 a barrel last week.
"We continue to believe that — even with the loss of Libyan production —the oil market has adequate inventory and OPEC spare production capacity to avoid the degree of physical tightness experienced in 2008 well into next year," Goldman said in a note to clients.
London Brent crude fell more than 2.5 percent, below $121 a barrel, while U.S. light crude fell more than 3.5 percent, below $106 a barrel.
Goldman's decision to also book profits on metals, including gold, silver, copper and platinum, sent prices of these commodities falling as well. Gold traded below $1,462 an ounce.
"I think we’re peaking out on commodity prices," says Jim Paulsen, chief investment strategist at Wells Capital Management, who said tightening policies in emerging markets like China are succeeding in slowing growth.
"You’ll see U.S. and global growth slow a bit, which takes upward trend out of commodities markets," Paulsen said.
The downdraft is being led by energy and materials sectors. Oil and gas drillers, suppliers, and producers pushed energy stocks lower, including Nabors Oilwell Varco , Nabors Industries and ConocoPhilips .
Alcoa led the materials sector lower after reporting first-quarter earnings of 28 cents per share, excluding one-time items. While earnings were slightly better than expected, the aluminum producer's sales of $5.96 billion, up from $4.89 billion in the same quarter last year, missed expectations by economists surveyed by Reuters who estimated Alcoa would report $6.07 billion in sales.
Cliff's Natural Resources and Freeport McMoran Copper & Gold also sank.
Also in earnings news, Chevron indicated its exploration and production earnings would be higher in the first quarter than they were in the fourth quarter.
JPMorgan Chase , Bank of America and Google will report earnings later in the week.
Commodities have set the tone for the markets recently as prices of gold, silver and oil have risen to new heights. Cisco traded flat after news it will overhaul its consumer products division and cut 550 jobs. Critics have targeted the division, saying the networking giant has strayed from its core business. Last week, CEO John Chambers admittedCisco had lost its way.
Procter & Gamble gained slightly after news the consumer products giant will raise its dividend 9 percent.