Beth Belton and Adam Shell, USA TODAY
Stocks ended down sharply Monday as Wall Street struggled to shake off the first down January for the Dow Jones industrial average and the Standard & Poor's 500 since 2010.
The Dow ended down a blistering 326 points -- losing 2.1% to 15,372. The S&P 500 index dropped 2.3%, while the Nasdaq composite index tanked 2.6%.
Weaker reports on U.S. manufacturing and construction spending brought fresh concerns about the economy.
Investors were also disappointed in auto sales from General Motors and Ford.
"What is clear is there is a lot of jitteriness in the market right now," says Thorne Perkin, president of Papamarkou Wellner Asset Management. "The general investment environment is weak right now."
The market is being hurt by skittishness and profit-taking after last year's 30% gain. Investor sentiment has also been hurt by the currency selloffs in emerging market countries like Turkey and South Africa. Signs of a slowdown in China and U.S. manufacturing has added to the gloom.
Still, Perkin says the market pullback is healthy, especially given the market's huge runup last year and the fact that the U.S. stock market hasn't suffered a 10% correction since 2011.
"There's a risk-off feel," Perkin says. "U.S. corrections are healthy. It's how you avoid bubbles by having speed bumps in the road. To say the U.S. market is overdue for a correction is maybe the understatement of the year. The free ride is over and fundamentals will matter more now that the Fed is printing less money."
The Federal Reserve, of course, began reducing its market-friendly stimulus this year.
Signs of risk aversion and investors preference for safer assets were abundant.
A closely watched Wall Street "fear gauge" and volatility measure, known as the VIX, climbed nearly 9% Monday to its highest level since early October. Similarly, prices of long-term U.S. government bonds rose, pushing the yields, which moves in the opposite direction, sharply lower. The 10-year Treasury note sank to 2.61% Monday, its lowest yield since early November and well below the 3.03% level it ended at in 2013.
Global stocks were lower as Japan's benchmark Nikkei 225 index fell 2% to 14,619.13 amid lingering jitters about weakness in the financial markets of some developing countries. Japan's benchmark index is now down 10.3% from its Dec. 30 high and officially in "correction" territory.
Markets were closed in Hong Kong, China, Taiwan and Malaysia for Lunar New Year holidays.
European shares were also hammered. Germany's DAX index flopped 1.3 to 9,187 and France's CAC 40 index tripped 1.4% to 4,108. Britain's FTSE 100 index stumbled 1.1% to 6,467.
On Friday, the Dow closed down 149.76 points, or 0.9%, to 15,698.85. The S&P 500 closed down 11.60 points, 0.7%, to 1,782.59. The tech-laden Nasdaq composite ended down 19.25 points, 0.5%, to 4,103.88.
Investors continue to flee to the safety of fixed-income investments. The yield on the bellwether 10-year Treasury note fell to 2.61% from 2.65% Friday. As recently as the first week of January, the yield, which moves inversely to the price, was at 3.03%, according to Yahoo Finance data.
The slow start on Wall Street in January, which often serves as a barometer of how stocks trade for the entire year, is the latest worry of skittish investors, who have been reacting negatively to roiled emerging markets. According to the Stock Trader's Almanac, when the first month of the year is negative the chances of finishing the full year in the plus column drop to roughly 50-50, according to the Stock Trader's Almanac.
Benchmark U.S. crude for March delivery was down 87 cents at $96.62 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 74 cents to close at $97.49 a barrel.