Stocks fell sharply on Monday, with the Dow Jones Industrial Average posting its worst day in nearly two years, as worries over the health of the U.S. economy sparked a global market sell-off.

The Dow dropped 1,033.99 points, or 2.6%, to end at 38,703.27. The Nasdaq Composite lost 3.43% and closed at 16,200.08, while the S&P 500 slid 3% to end at 5,186.33. The blue-chip Dow and S&P 500 registered their biggest daily losses since September 2022.

Japan’s stock market posted its worst drop since Wall Street’s Black Monday in 1987, contributing to fears of global turmoil in the markets.

Fears of a U.S. recession were the main culprit for the global market meltdown after Friday’s disappointing July jobs report. Investors are also concerned that the Federal Reserve is behind in cutting interest rates to bolster an economic slowdown, with the central bank choosing instead to keep rates at the highest in two decades last week.

Investors are continuing to sell off megacap tech stocks and the once-hot artificial intelligence trade. Tech shares were among the worst performers Monday:

In Asia overnight, Japan stocks confirmed a bear market as Asia-Pacific investors had their first chance to react to the sour jobs figures in the U.S. from Friday. The 12.4% loss on the Nikkei, which closed at 31,458.42, was the worst day for the index since the “Black Monday” of 1987 hit Wall Street. The loss of 4,451.28 points on the index was also the largest in terms of points in its entire history. The Dow lost more than 22% in a single day on Black Monday.

Other global markets were also severely affected:

• U.S. Treasury yields tumbled on the recession fears and as investors flooded into bonds for a global safe haven. Bond prices move inversely to yields. The benchmark 10-year note on Monday last yielded 3.78%. The benchmark yield hit its lowest level since June 2023.
• Bitcoin tumbled from nearly $62,000 on Friday to around $54,000 on Monday.
• Europe’s Stoxx 600 was off by 2.2%.
• The Cboe Volatility Index was last at about 38, after climbing as high as 65, its greatest level since the early days of the Covid-19 pandemic in 2020. The so-called VIX index is known as Wall Street’s “fear gauge,” and it’s based on market pricing for options on the S&P 500.

There is also chatter about the unwind of the yen “carry trade” adding fuel to the global market decline after the Bank of Japan raised interest rates last week, reducing the interest rate differential between Japan and the U.S. That has contributed to the yen rising in value versus the dollar, ending a practice of traders borrowing in the cheap currency to buy other global assets.

“The market was whistling past the graveyard. I think people were basically lulled into a sense of security, yet the market itself was very vulnerable to a correction — and the weaker than expected economic and employment data provided that catalyst for correction,” said Sam Stovall, chief investment strategist at CFRA Research. The S&P 500 is currently around 8.5% off from its recent high.

Chicago Fed President Austan Goolsbee, while avoiding commitment to a specific course of action, indicated on CNBC’s “Squawk Box” on Monday that interest rates at their current level may be too “restrictive.”

If economic conditions meaningfully deteriorate, the central bank will “fix it,” Goolsbee added.

Just 22 stocks in the S&P 500 were higher in the brutal session for investors.