The Dow Jones industrial average fell as much as 500 points in early trading, bringing the index down 10% from the record high it reached on January 26.
Worries about inflation set the market rout in motion last Friday, and many market watchers have been predicting a pullback after the market's relentless march higher over the past year. Gold prices fell 1.0% to a 2-1/2-week low.
Stocks stumbled in early trading on Wall Street as banks fell following punitive action against Wells Fargo.More news: South Africa's Jacob Zuma could quit within days
More news: Lindsey Vonn confirms Pyeongchang will be final Olympics, will enter three races
More news: Boy climbs into claw machine to get stuffed animal
Those include worries about a potential rise in US inflation or interest rates and whether budget disputes in Washington.
Monday's decline of 1,175 points on the Dow was, by far, the biggest point decline in history. "They love it, but they're also respectful and terrified".
Japan's benchmark Nikkei 225 index surged as soon as trading began as investors sought bargains, finishing morning trading up 3.1 percent at 22,270.56.
Market commentators have attempted to explain the sudden declines seen this week with many putting the blame on complex exchange-traded notes and algorithmic trading strategies, according to the FT. The S&P 500 slumped 3.8 per cent yesterday, while the Dow dropped 4.2 percent as losses accelerated late in the trading day.
"There was a big dip last Friday and there's certain points that if the market falls to a certain level, the computer program just automatically says to sell, which is why we saw a very big dip today", said Halverson. The Dow had previously never lost more than 777 points in a single day, as reported by CNN Money.
"Widespread and excessive optimism left stocks vulnerable to increased volatility as bond yields have moved off their lows", said Bruce Bittles, chief investment strategist at Baird.
The good news is that Dow futures are signaling a modestly higher open at the end of an ugly week.