The selloff began abroad, with financial markets in Asia and European falling sharply.
Leading the decline was Japan's Nikkei stock average, which fell 2.8 percent after the Japanese government announced the economy shrank more than expected in the last quarter of 1999. It was the second consecutive quarterly decline of the gross domestic product, meaning the economy was technically back in recession.
Investors had hoped that an economic recovery in Japan would compensate for any slowdown in the United States in the coming years.
The downturn in Asian markets set off selling in Europe too. In afternoon trading, Germany's DAX index was down 4.1 percent, Britain's FT-SE 100 was down 2.4 percent, and France's CAC-40 was down 3.6 percent.
The biggest selling came in technology stocks, with many investors pulling back their holdings amid concern that these shares have soared too high, too fast in recent months.
"There was a lot of chatter of the weekend on the Wall Street (television) shows about the impending doom of the Nasdaq," said Brian G. Belski, chief investment strategist at George K. Baum & Co., in Kansas City, Mo. "The market by virtue of its recent ascent, especially the Nasdaq, has set itself up for a bit of a correction."