The Dow Jones Industrial Average plummeted 1,175 points by the closing bell on Monday afternoon, erasing its gain for the year, as the market extended a slump that began on Friday.

Stocks took their worst loss in six and a half years and ended a period of record-setting calm for stocks.

Earlier in the day, the Dow briefly plunged nearly 1,600 points, before recouping half that loss within minutes, but its gains for the year were still gone.

The dramatic drop on Monday at one point brought the Dow below 24,000 points. The trading day ended with Dow at 24,345 point, down 4.6 per cent.

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Down it goes: The Down Jones Industrial Average lost 1,175 points, or 4.6 per cent, ending the trading day on Monday at 24,345

Traders work on the floor of the New York Stock Exchange (NYSE) on Monday, which saw the market extending a slump that began Friday

Seeing red: A television screen on the floor of the New York Stock Exchange headlines the stock index news at the close of trading Monday

The Standard & Poor’s 500 index, the benchmark most professional investors and many index funds use, skidded 113.19 points, or 4.1 per cent, to 2,648.94. That was its biggest loss since August 2011, when investors were fearful about European government debt and the US came close to breaching its debt ceiling.

The Nasdaq composite fell 273.42 points, or 3.8 per cent, to 6,967.53. The Russell 2000 index of smaller-company stocks sank 56.18 points, or 3.6 per cent, for 1,491.09.

The market’s slump began on Friday as investors worried that creeping signs of higher inflation and interest rates could derail the market’s record-setting rally.

'When you have rates moving upwards, typically what happens is that financial conditions tighten, things like bank lending, mortgage lending start to slow and then the economy is at risk of a potential downturn,' said Mona Mahajan, investment strategist with Allianz Global Investors in New York.

The Dow plunged more than 660 points by the time it closed on Friday afternoon.

This fall marked the stock market's worst week in two years.

The last time the index shed this many points in a single day was on August 8, 2011.

A board above the trading floor of the New York Stock Exchange shows the closing number for the Dow Jones industrial average

Touting tax cuts: As Dow continued losing points, President Donald Trump was boasting about his recently-passed tax overhaul law in Ohio (pictured)

As Dow continued sliding, President Donald Trump was in Ohio on Monday praising his recently-passed tax overhaul law and telling workers at a factory near Cincinnati that 'America is once again open for business.'

Trump said the tax cuts are at the center of improving economic conditions.

The stock market has been unusually calm for more than a year. The combination of economic growth in the US and other major economies, low interest rates, and support from central banks meant stocks could keep rising steadily without a lot of bumps along the way. Experts have been warning that that wouldn’t last forever.

David Kelly, the chief global strategist for JPMorgan Asset Management, said the signs of inflation and rising rates are not as bad as they looked, but after the market’s big gains in 2017 and early 2018, stocks were overdue for a drop.

'It’s like a kid at a child’s party who, after an afternoon of cake and ice cream, eats one more cookie and that puts them over the edge,' he said.

The Dow plunged more than 660 points by the time it closed on Friday afternoon