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The S&P 500 index suffered its worst loss in six weeks on Monday as Wall Street braced for an interest-rate hike and fretted about weak Chinese trade data.
Nine of the 10 major S&P sectors ended lower, led by consumer discretionary and energy stocks. The Dow Jones industrial average slipped back into negative territory for the year, with only two of its 30 components higher on the day.
U.S. companies face the prospect of higher borrowing costs if the Federal Reserve raises interest rates next month, as is widely expected after Friday's strong jobs report.
"There are short-term myopic concerns about a Fed rate hike," said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa.
"Bond and stock prices will decline when the Fed makes that first announcement, but ultimately, stocks will thrive because it will prove the U.S. economy is healthy enough to stand on its own," Dollarhide said.
Investors also focused on renewed fears of a slowdown in China, a key market for many companies, ahead of the crucial holiday shopping season.
China, one of the United States' top trade partners, ended October with a record high trade surplus, with both exports and imports falling.
All three major U.S. stock indexes trimmed some of their losses late in the session.
The Dow Jones industrial average ended down 1.0 per cent at 17,730.48 points and the S&P 500 lost 0.98 percent, to 2,078.58. The Nasdaq Composite dropped 1.01 per cent to 5,095.30.
The CBOE Volatility index, known Wall Street's fear gauge, rose 15 per cent to 16.52, the most in a single session in six weeks.
Following a dramatic selloff in August, fueled by fears about a slowing Chinese economy, and then a recovery in October, helped by not-so-bad corporate report cards, the S&P 500 remains up 0.99 per cent for the year while the Dow is down 0.52 per cent.
With 88 percent of S&P 500 companies having posted their third-quarter results, earnings appear to have dipped 0.9 percent compared to the year before, better than the 4.2 per cent decline that analysts on average predicted at the start of October, according to Thomson Reuters data.
After the bell on Monday, Lions Gate Entertainment posted second-quarter revenue below analysts' expectations and its stock dropped 12.2 per cent.
Priceline slumped 9.6 per cent after a weak fourth-quarter profit forecast.
The energy sector was the worst-hit among the S&P sectors, falling 1.45 per cent after a fall in oil prices.
Only two Dow components rose. Walt Disney gained 0.65 per cent, while DuPont added 1.0 per cent after the chemical and seeds producer said interim Chief Executive Ed Breen would stay on.
Dean Foods rose 7.30 per cent after reporting a better-than-expected quarterly profit.
Plum Creek Timber soared 17.3 per cent. Weyerhaeuser said it would buy the company to create a $23 billion timber company. Weyerhaeuser fell 2.96 percent.
NYSE declining issues outnumbered advancers 2,476 to 627. On the Nasdaq, 1,964 issues fell and 849 advanced.
The S&P 500 index showed 3 new 52-week highs and 10 lows, while the Nasdaq recorded 101 new highs and 64 lows.
About 7.1 billion shares changed hands on U.S. exchanges, compared with the 7 billion daily average for the past 20 trading days, according to Thomson Reuters data.d
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