The Dow Jones Industrial Average fell 614.41 points, or 1.78%, for its worst day since July 19, while the S&P 500 fell 1.7% as every sector reported losses for its worst daily performance since May 12. The Nasdaq Composite also fell 2.19%, which was also its worst performance since May.
Investors mostly responded to news that Chinese real estate conglomerate Evergrande was on the brink of default.
Evergrande was struggling to manage its $300 billion in debt with interest on some of its loans due Monday as the company is set to pay interest on two of its bond worth more than $100 million later in the week.
The White House said it was monitoring the markets but noted Evergrande’s business was “overwhelmingly centered in China” as Ryan Detrick, a chief market strategist for LPL Financial, said the crisis was not likely to lead to a collapse.
“We think the odds do favor the Chinese communist government will get involved should there be a default,” said Detrick. “They are holding out as of now, but the fallout could be too great for them to avoid intervening.”
Bank stocks struggled following the news as Bank of America fell 3.29% and JPMorgan Chase dropped 3.03%.
Stocks tied to global growth also turned in losses as Ford dropped 5.46%, General Motors stock declined 3.82% and Boeing closed down 1.81%.
Energy stocks also fell as West Texas Intermediate crude oil fell about 2%.
Monday’s sell-off briefly pushed the S&P 500 to 5% below its previous record on an intraday basis before markets bounced back near closing.
U.S. markets have struggled in a traditionally difficult September with the Dow falling 3.9%, the S&P 500 dropping 3.7% and the Nasdaq declining 3.6%.