A steep sell-off in US stocks worsened in a pre-holiday shortened session, as a move by the US Treasury secretary to convene a crisis group and other political developments rattled investors and pushed the S&P 500 to the brink of a bear market.
All three major indexes ended down more than 2 per cent on the day before the Christmas holiday. The S&P 500 ended down about 19.8 per cent from its September 20 closing high, just shy of the 20 per cent threshold commonly used to define a bear market.
Treasury Secretary Steven Mnuchin called top US bankers on Sunday amid the pullback in stocks. Investors also were grappling with a federal government shutdown and reports that President Donald Trump privately discussed the possibility of firing the Federal Reserve chairman.
"The headlines we are seeing today, yesterday, over the weekend are not great," said Vinay Pande, global head of trading strategies at UBS Global Wealth Management.
"The market is concerned about what is happening in DC In the face of a large correction in the market, there seems to be disarray and disunity, and people aren't speaking with one voice, which I think is discouraging to anybody in the market."
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The Dow Jones Industrial Average on Monday fell 653.17 points, or 2.91 per cent, to 21,792.2, the S&P 500 lost 65.52 points, or 2.71 per cent, to 2,351.1 and the Nasdaq Composite dropped 140.08 points, or 2.21 per cent, to 6,192.92.
Last week, the S&P 500 suffered its biggest weekly percentage drop since August 2011, while the Dow had its biggest weekly drop since October 2008.
All 11 S&P 500 sectors ended in negative territory on Monday, meaning they were all in negative territory for the year.
Roughly three-quarters of the S&P 500 was trading in bear market territory.
All 30 components of the Dow industrials also finished in the red on Monday.
For the third straight day, more than 2,600 New York Stock Exchange- and Nasdaq-listed stocks were hitting 52-week lows, reflecting a depth of selling the market had not experienced since the height of the financial crisis a decade ago.
Mnuchin spoke on Sunday with the heads of the six largest US banks, who confirmed they have enough liquidity to continue lending and that "the markets continue to function properly".
But investors said his move to convene a call on Monday with the President's Working Group on Financial Markets, commonly known as the "Plunge Protection team", may have weighed on investors.
"When the Dow is down 600 points, it's hard to say it was a positive," said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago.
"Although his intention was a very good one, the net feeling I think was, 'Is there a bigger problem that we don't know about?'" he said.
Aside from Mnuchin's move, Trump's budget director and chief of staff, Mick Mulvaney, on Sunday said a partial US government shutdown could continue to January 3, when the new congress convenes and Democrats take over the House of Representatives.
The stock market closed at 1pm local time ahead of Tuesday's Christmas holiday.
Given the extremely restricted liquidity at this time of year, Pande said, "any selling here will beget a very large decline".
About 5.9 billion shares changed hands in US exchanges, compared with the 8.9 billion-share daily average over the past 20 sessions.
Declining issues outnumbered advancing ones on the NYSE by a 3.56-to-1 ratio; on Nasdaq, a 2.68-to-1 ratio favoured decliners.
The S&P 500 posted no new 52-week highs and 242 new lows; the Nasdaq Composite recorded five new highs and 837 new lows.
