U.S. stocks plunged, sending the Dow down almost 1,600 points Monday before rebounding modestly, as major averages erased gains for the year. Treasuries rallied and gold rose.

The Dow finished down by 4.6%, or 1,175 points at 24,345 — its steepest drop since Aug. 24, 2015. It was the largest single-day point drop ever for the Dow. The S&P 500 traced a similar trajectory, with its decline at 4.1%. Both are now lower for the year. About $1 trillion in market capitalization was lost Monday.

The downward stock market move was sparked by U.S. wage data on Friday.
The downward stock market move was sparked by U.S. wage data on Friday. Bloomberg News

“This is classic risk off that may not end any time soon,” says Win Thin, head of emerging markets currency strategy at Brown Brothers Harriman.

Treasuries popped, sending the 10-year yield down more than 10 basis points, and gold future pushed higher. The dollar stabilized while the yen advanced.

While Friday’s market rout came amid U.S. wage data that pointed to quickening inflation, which would lead to higher interest rates and Treasury yields and, in turn, rising borrowing costs for companies, the selling Monday came amid heightened concerns despite few major data points.

“I think sentiment was a little too optimistic,” says Brad McMillan, chief investment officer for Commonwealth Financial Network. “What was driving the market up in January? It wasn’t the fundamentals, as good as they were, it was excessive confidence.”

Which active funds had the strongest flows in 2017?
The strategy draws investor interest again, mostly on the strength of fixed income.

Elsewhere, oil extended declines after U.S. explorers raised the number of rigs drilling for crude to the most since August. Copper climbed the most in a week. Bitcoin slid below $7,000.

Bloomberg News