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The S&P 500 dropped more than 1% and posted its worst three-day slide since November 2011 on Monday following worries that global economic weakness will dampen US earnings, along with concern about the spread of Ebola.
After trading nearly even for much of the session, stocks fell sharply late in the day and the S&P 500 closed below its 200-day moving average for the first time since Nov 16, 2012. The CBOE Volatility index ended at 24.64, its highest close since June 2012.
Investors reacted to a witch's brew of negative catalysts that included a widening Ebola scare, the potential impact on US earnings from tepid global demand, plunging oil prices and a breakdown of technical support levels.
The day's worst-performing sector was S&P energy, which lost 2.9%. It is down 7.6% for the last three sessions, its worst three-day slide since September 2011. Shares of ConocoPhillips slid 3.3% to $68.07.
"There are worries about how corporate earnings are going to come out later on this week. The dollar has been on an uptrend and that's going to hurt earnings for global companies," said Giri Cherukuri, head trader at OakBrook Investments LLC, in Lisle, Illinois.
This week will be one of the busiest weeks of the reporting period, with results from Dow components Intel, Johnson & Johnson and General Electric on the agenda.
Airline and other travel-related stocks fell after a Dallas nurse contracted Ebola while caring for a dying Liberian patient.
Shares of United Airlines fell 7.3% to $40.55, while shares of Carnival were down 4.6% at $33.88.
The Dow Jones transportation average dropped 2.2% and is now down 11.1% from its record close on Sept. 18, which puts it in correction territory.
Five of the 10 S&P 500 sector indexes - industrials, energy, telecommunications, consumer discretionary and materials - ended in negative territory for the year.
The day's drop followed the S&P and Nasdaq's worst weekly percentage declines since May 2012 in concerns the market is in for further weakness and more jolts.
The Dow Jones industrial average fell 223.03 points, or 1.35%, to 16,321.07, the S&P 500 lost 31.39 points, or 1.65%, to 1,874.74 and the Nasdaq Composite dropped 62.58 points, or 1.46%, to 4,213.66.
The S&P 500 has lost 4.8% in the last three sessions, its worst three-day decline since November 2011.
About 8.7 billion shares changed hands on US exchanges, compared with the 7.9 billion average for the last five sessions, according to data from BATS Global Markets.
The largest percentage gainer on the S&P 500 was CSX Corp, up 5.9%, while the largest percentage decliner was QEP Resources, down 9.2%.
Canadian Pacific Railway Ltd has approached CSX about merging the two North American railroad operators to create a transcontinental carrier worth more than $60 billion, according to the Wall Street Journal.
Declining issues outnumbered advancing ones on the NYSE by 2,061 to 976, for a 2.11-to-1 ratio on the downside; on the Nasdaq, 1,525 issues fell and 1,156 advanced.
