As the number of reported coronavirus cases outside China grew and sparked fears of a worldwide economic slowdown, the Dow Jones Industrial Average closed down 1,031.61 points, the biggest drop since February 2018.
The Dow closed at 27,960.80, down 3.56 percent, after falling as much as 1,080 points in intraday trading.
In the 2018 fall, the index closed down 1,175 points on fears a strong economy would spark inflation and force the US Federal Reserve to raise interest rates to cool the economy.
Monday's drop was the third consecutive day of losses and erased the Dow's gains for 2020, dragging the index into the red.
The S&P 500 declined 3.35 percent. The tech-heavy Nasdaq Composite fell 3.71 percent but remains up about 3 percent for the year. The S&P is down slightly in 2020.
Earlier this month, all three major indexes closed at record highs as fears about the spread of the new coronavirus in China, also called COVID-19, appeared to ease.
New cases of the disease were reported in Italy, testing the European Union's open borders. But the World Health Organization downplayed fears of a pandemic.
The US Centers for Disease Control and Prevention (CDC) said the 14 confirmed cases in the US included two new cases in California. The CDC's totals don't include 39 cases among those evacuated from a cruise ship in Japan and the city of Wuhan in China.
US airline stocks were hit hard Monday. Delta Air Lines closed down 6.29 percent. American Airlines closed down 8.52 percent. United Airlines fell 3.26 percent.
Semiconductor makers also took a tumble. Intel, a Dow component, closed down 4.01 percent. Advanced Micro Devices dropped 7.81 percent. Nvidia was down 7.07 percent.
The majority of Apple's iPhones are assembled in Shenzen, China, and the company's stock took a hit, closing down 4.75 percent.
Last week, Apple said this quarter's revenue will fall short of the targeted range of $64 billion to $67 billion because the outbreak has limited iPhone production and eroded demand in China, where the company earns about 20 percent of its revenue.
Supply-chain disruptions in key industries like auto parts and apparel could slow the US economy, some analysts warned.
Goldman Sachs believes fallout from the coronavirus will slice as much as 0.8 percent from the US economy in the first quarter, up from the previously estimated 0.5 to 0.6 of a point.
"Risks are clearly skewed to the downside with an increasing amount of companies suggesting potential production cuts should supply chain disruptions persist into the second quarter or later," said the New York investment bank in a research note to investors.
Goldman Sachs said the effect of the coronavirus on US growth is likely to come in four areas: reduced US exports to China, reduced spending in the US by Chinese tourists and students, a decline in US purchases of imported goods and a decline in US production due to supply-chain production.
"Our Asia Economics team's baseline assumption remains a sharp reduction in the rate of new infections by the end of the first quarter and a return of China activity to normal levels in April/May," Goldman Sachs said.
Goldman Sachs found "no strong evidence" that increased dependence on Chinese supply chains has significantly cut US capital spending. This suggests that the long-term outlook is strong.
Morgan Stanley believes China's economy will gradually return to normal despite challenges posed by a delayed return to work by migrant workers and the time needed to restart the transportation network.
"Supply-chain disruption is the key factor in assessing the impact on global growth," the New York investment bank said.
The price of oil is a proxy for future economic activity. Investors fear the coronavirus outbreak could slow the worldwide economy and reduce demand for oil. The price of Brent crude, a worldwide benchmark, fell $2.41 a barrel Monday, or 4.16 percent.
On Monday, Exxon Mobil closed down 4.67 percent. Chevron fell 3.94 percent. Conoco was down 3.52 percent.
Gold rose to a seven-year high, jumping 1.7 percent a troy ounce to $1,172.40 as investors sought security.
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