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The Dow Jones Industrial Average fell 614.41 points, or 1.78%, to 33,970.47.The 30-stock average was down 971 points at it low for the day.

The S&P 500 lost 75.26 points, or 1.70%, to 4,357.73.

The Nasdaq Composite dropped 330.07 points, or 2.19%, to 14,713.90.

The Dow registered its biggest daily percentage drop since July, while the CBOE volatility index, known as Wall Street’s fear gauge, rose.

The S&P 500 is now down about 4% from its Sept. 2 record high close.

Strategists at Morgan Stanley said they expected a 10% correction in the S&P 500 as the Fed starts to unwind its monetary support, adding that signs of stalling economic growth could deepen it to 20%.

The Nasdaq also hit its lowest level in about a month, but indexes pared losses just before the close to end well off their lows of the session. The Nasdaq was down more than 3% during the day.

There were a number of reasons for the sell-off:

· Investors fear a contagion sweeping financial markets from the troubled China property market. Hong Kong equities saw a big sell-off during the Asia trading session on Monday. The benchmark Hang Seng index plunged 4% with embattled developer China Evergrande Group on the brink of default.

· The Federal Reserve begins a two-day meeting Tuesday and investors are worried the central bank will signal it’s ready to start pulling away monetary stimulus amid surging inflation and improvement in the job market.

· Covid cases because of the delta variant remain at January levels as colder weather approaches in North America.

· September has the worst track record of any month, averaging a 0.4% decline, according to the Stock Trader’s Almanac. History shows the selling tends to pick up in the back half of the month.

· Investors are also concerned about brinkmanship in DC as the deadline to raise the debt ceiling approaches. Congress returned to Washington from recess rushing to pass funding bills to avoid a government shutdown.

Reference: CNBC, Reuters