United States stocks closed more than two% lower, after a disappointing reading on manufacturing activity and lingering concerns over weakness overseas led investors to start February with an anxious stance.
At the closing bell, the Dow Jones Industrial Average declined 326.05 points, or 2.08%, at 15,372.80.
The S&P 500 shed 40.70 points, or 2.28%, to 1,741.89, while the Nasdaq Composite Index declined 106.92 points, or 2.60%, to 3,996.96.
On Friday, the Dow fell 150 points, or 0.9%, and the S&P 500 lost 0.6%, to end January with the worst monthly percentage declines since May 2012. The S&P 500 is now down 5.6% from its January 15 record-high close of 1848.38.
US stocks began the session slightly lower, then accelerated their losses after the Institute for Supply Management's manufacturing purchasing managers index for January came in at 51.3. The reading fell well short of a forecasted reading of 56 and a decline from December's 56.5.
Later this week, investors are likely to remain focused on a spate of additional fourth-quarter earnings reports, as well as the February jobs report due on Friday. Among the companies reporting this week are Merck, Disney and General Motors.
Investors remain on edge about the health of emerging markets following some weak economic readings and a sell-off in overseas currencies. The concern has translated to wariness of risky investments like stocks so far in 2014, with safe-haven plays like Treasurys rallying.
"The markets are still vulnerable," said Colin Cieszynski, senior market analyst at brokerage at CMC.
"We need a retrenchment in the [US] market, so I wouldn't be surprised to see a decline of 10% or so."
Among emerging market currencies, the Turkish lira was little changed and the South African rand and Hungarian forint rose slightly against the dollar. But equities remained weak, with the iShares MSCI Emerging Markets exchange traded fund falling 0.8% in early trading.
In addition, automakers released weak monthly sales figures throughout the session. General Motors, Ford and Toyota all saw significant sales declines, while Chrysler bucked the trend with another lift in sales.
Shares of General Motors and Ford Motor both fell.
The yield on the 10-year Treasury note inched up to 2.671% after hitting a three-month low on Friday. Gold futures gained 0.9% to $1,251 an ounce, while crude-oil futures eased slightly to $97.44 a barrel. The dollar lost some ground against the euro and the yen.
"The outbreak of nervousness in risk assets has been attributed mainly to a combination of [US Federal Reserve] tapering, Chinese growth concerns and emerging-market currency volatility. We suspect the lukewarm corporate earnings news is as big an issue for equity investors, " said Ian Williams, economist and strategist at brokerage Peel Hunt.
Asian shares fell following the latest official data for the Chinese manufacturing sector, which indicated a modest slowdown in January, while European markets also closed lower.