Wall Street sank after China defied Washington by announcing retaliatory tariffs, the latest salvo in the two countries' increasingly belligerent trade war, sending investors fleeing equities for less risky assets.
All three major US indexes lost ground on Monday in a widespread sell-off, with the tech-heavy Nasdaq posting its biggest one-day percentage loss this year.
The S&P 500 and the Dow both had their largest percentage drops since January 3.
China said it would impose higher tariffs on $US60 billion in US goods despite President Donald Trump's warnings not to retaliate against additional tariffs on Chinese imports announced by the White House on Friday. The move stoked fears of a global economic downturn.
"The market's realising that this was an absolute breakdown of (trade) talks and everything is gone backwards," said Michael O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.
"It could be very bad," he added. "There's a lot of uncertainty. This should lead to further slowing in the economy."
Investors responded by fleeing equities for safe-haven assets.
US Treasury yields fell to six-week lows, with 10-year yields falling below those of three-month bills, an inversion seen by many as a potential harbinger of recession.
Gold prices rose to a near three-month high.
The CBOE Volatility index, a gauge of investor anxiety, posted its biggest daily point gain so far this year.
The Dow Jones Industrial Average fell 617.38 points, or 2.38 per cent, to 25,324.99, the S&P 500 lost 69.53 points, or 2.41 per cent, to 2811.87 and the Nasdaq Composite dropped 269.92 points, or 3.41 per cent, to 7647.02.
Of the 11 major sectors of the S&P 500, only utilities ended the session in the black. Trade-sensitive tech companies suffered the largest percentage decline.
Among stocks particularly vulnerable to US-China tariffs, Boeing slid 4.9 per cent and Caterpillar fell 4.6 per cent while the Philadelphia Chip index was down 4.7 per cent, posting its biggest percentage drop since January 3 and extending last week's 6 per cent decline.
Shares of Apple sank 5.8 per cent on the double whammy of heightened trade tensions and a decision by the US Supreme Court to allow an antitrust lawsuit accusing the company of monopolising the iPhone app market.
Uber Technologies extended its slide, falling 10.8 per cent on its second day as a publicly traded company following Friday's underwhelming debut.
Ride-hailing peer Lyft was also down, dropping 5.8 per cent.
Shares of Tesla fell 5.2 per cent to their lowest in more than two years.
First quarter reporting season is in the home stretch, and of the 451 companies in the S&P 500 that have posted results, 75.2 per cent have come in above expectations.
Analysts now see an S&P 500 earnings increase of 1.3 per cent for the January-March period, significantly better than the 2 per cent decrease expected on April 1.
Declining issues outnumbered advancing ones on the NYSE by a 4.81-to-1 ratio; on Nasdaq, a 5.12-to-1 ratio favoured decliners.
The S&P 500 posted 12 new 52-week highs and 22 new lows; the Nasdaq Composite recorded 30 new highs and 151 new lows.
Volume on US exchanges was 8.24 billion shares, compared to the 6.97 billion-share average over the last 20 trading days.
Share
