The Dow Jones industrial average briefly plunged nearly 1,600 points Monday before bouncing back to recover a chunk of the losses, definitively ending a prolonged period of calm in the U.S. stock market.
At close, the Dow was down 1,175 points, or 4.6 percent, to 24,345. The descent erased its gains for the year.
The drop Monday was the Dow's biggest-ever in terms of points, but it has seen a larger percentage drop within the last decade.
The slump began on Friday as investors worried that creeping signs of higher inflation and interest rates could derail the U.S. economy along with the market's record-setting rally. Energy companies, banks, and industrial firms took some of the worst losses.
The Standard & Poor's 500, the benchmark for many index funds, fell 113 points, or 4.1 percent, to 2,648. The Nasdaq fell 273, or 3.8 percent, to 6,967.
Bond prices rose. The yield on the 10-year Treasury fell to 2.73 percent.
Increased inflation might push the Federal Reserve to raise interest rates more quickly, which could slow down economic growth by making it make it more expensive for people and businesses to borrow money. And bond yields haven't been this high in years. That's making bonds more appealing to investors compared with stocks.
The stock market has been unusually calm for more than a year. The combination of economic growth in the U.S. and other major economies, low interest rates, and support from central banks meant stocks could keep rising steadily without a lot of bumps along the way. Experts have been warning that that wouldn't last forever.
David Kelly, the chief global strategist for JPMorgan Asset Management, said the signs of inflation and rising rates are not as bad as they looked, but after the market's big gains in 2017 and early 2018, stocks were overdue for a drop.
"It's like a kid at a child's party who, after an afternoon of cake and ice cream, eats one more cookie and that puts them over the edge," he said.
As bad as Monday's drop was, the market saw worse days during the financial crisis. The Dow's 777-point plunge in September 2008 was equivalent to 7 percent.