US stocks plunge in early trading as Chinese stocks slide further; S&P 500 in correction mode

U.S. stock markets plunged in early trading Monday following a big drop in Chinese stocks.

The Dow Jones industrial average fell more than 1,000 points in early trading and the Standard & Poor's 500 index fell into correction territory, that's Wall Street jargon for a drop of 10 percent or more from a recent peak.

Treasuries surged as investors bought less risky assets.

Growing concerns about a slowdown in China had already shaken markets around the world on Friday, driving the U.S. stock market sharply lower. A big sell-off in Chinese stock on Monday caused the rout to continue.

The Dow was 668 points, or 4.1 percent, lower as of 9:57 a.m. Eastern time. The Standard & Poor's 500 index dropped 81 points, or 4.2 percent, to 1,889. The Nasdaq composite fell 211 points, or 4.4 percent, to 4,496 points.

China's main index sank 8.5 percent amid fears over the health of the world's second-largest economy.

Oil prices, commodities and the currencies of many developing countries also tumbled on concerns that a sharp slowdown in China might hurt economic growth around the globe.

The Shanghai index suffered its biggest percentage decline since February 2007, with many China-listed companies hitting their 10 percent downside limits. The benchmark has lost all of its gains for 2015, though it is still more than 40 percent above its level a year ago.

Underlying the gloom in China is the growing conviction that policymakers and regulators may lack the means to staunch the losses in that nation. The country is facing a slowdown in economic growth, the banking system is short of cash and investors are pulling money out of the country, experts note.

"There is a lot of fear in the markets," said Bernard Aw, market strategist at IG.

China's dimming outlook is drawing calls for more economic stimulus from Beijing, though earlier government efforts to stop the sell-off in stocks appear to have done little to stabilize markets.

The bloodletting spread across Asia earlier, where Japan's Nikkei fell 4.6 percent, its worst one-day drop since in over two and a half years. Hong Kong's Hang Seng index fell 5.2 percent, Australia's S&P ASX/200 slid 4.1 percent and South Korea's Kospi lost 2.5 percent.

Those declines followed tumbles over the weekend in emerging markets such as Egypt, Dubai and Saudi Arabia.

The panic has underscored the scale of the challenge for Chinese leaders in seeking to curb excess investment and guide the economy toward a more sustainable pace of growth.

"My biggest concern is that global growth momentum is very fragile. The most important step is to see China take further action to try to bring their economy to a 7 percent growth path," said Rajiv Biswas, Asia-Pacific chief economist for IHS.

In currency trading, the dollar was at 119.99 yen on Monday, down from 122.05 yen on Friday. The euro rose to $1.1517 from $1.1388. Currencies fell hard in developing economies — particularly those that rely heavily on the export of commodities and oil, both of which China is a big consumer. The Russian ruble dropped 2.3 percent to a seven-year low.

In commodity markets, benchmark U.S. crude dropped $2.14 to $38.29 a barrel in electronic trading on the New York Mercantile Exchange. It fell 87 cents a barrel on Friday. Brent crude, a benchmark for international oils used by many U.S. refineries, fell $2.50 to $42.96 a barrel.