US stocks slumped on Monday as investors bailed out of commodity-related shares and other risky assets in favour of safe-haven US government debt as uncertainty grew about rising interest rates and slowing growth.
A sell-off across markets in Europe and Asia hit crude oil and metals prices early, which extended to related stocks such as aluminium producer Alcoa Inc and oil company Exxon Mobil Corp.
"This is a hangover from loose global monetary policy. We're just moving back to neutral. Investors have forgotten how easy liquidity was for the last few years," said Joseph Quinlan, chief market strategist at Banc of America Capital Management in New York.
"Global tightening means you'll see rotation out of riskier assets and into large-cap quality. Emerging markets, housing, small- to mid-cap stocks and commodities are four asset classes that thrive on cheap liquidity, but as the cost of capital goes up, they take it on the chin."
Investors bought US Treasury debt, driving the price of the benchmark 10-year note up more than half a point and pushing its yield briefly below 5 percent from 5.05 percent late Friday as they sought a safe haven from risk.
The Dow Jones industrial average was down 49.71 points, or 0.45 percent, at 11,094.35. The Standard & Poor's 500 Index was down 7.09 points, or 0.56 percent, at 1,259.94. The Nasdaq Composite Index was down 24.59 points, or 1.12 percent, at 2,169.29.
Investors worried that rising prices would force the Federal Reserve to extend its two-year-old policy of rate increases, a move they fear would slow the economy and stall earnings growth.
Economically sensitive stocks were some of the heaviest decliners among blue chips. Diversified manufacturer 3M Co was down 1.6 percent to $83, making it the biggest drag on the Dow. Aluminium maker Alcoa fell 3.6 percent to $30.84 on the New York Stock Exchange.
Investors also fled emerging markets as too risky, sending stocks and currencies in those countries tumbling. Overseas shares traded on the NYSE were some of the largest percentage losers on the exchange. Sinopec Shanghai Petroleum dropped 15 percent to $47.70 while India's Tata Motors Ltd sank 12.1 percent to $15.99.
Oil partially recovered after falling to a six-week low earlier. Oil-related shares were still the top decliners on the S&P 500.
Oil field services provider Schlumberger Ltd was down 3.6 percent to $62.30. Exxon Mobil Corp was down 0.8 percent to $59.97 and Chevron Corp fell 1.7 percent to $57.50.
On the earnings front, shares of home improvement retailer Lowe's Cos. Inc fell 4 percent to $60.20 after it said the slowdown in the housing sector could make it more challenging to make money. Lowe's also cut its second-quarter profit forecast and full-year sales forecast for stores open at least a year.
That hurt shares of rivals Home Depot Inc, the world's largest home improvement retailer, and Sears Holdings Corp SHLD.O, which sells large appliances, power tools and other products whose demand is driven by home sales. Home Depot's stock fell 1.5 percent to $38.36 on the NYSE, while Sears shares lost 2.8 percent to $157.38 on the Nasdaq.