U.S. stocks plunged more than 3.5 percent on Monday, closing off session lows in high volume trade as fears of slowing growth in China pressured global markets. (Tweet This) S&P 500 ended nearly 80 points lower, off session lows of about 104 points lower but still in correction territory after the tech sector failed intraday attempts to post gains. Nine of the 10 sectors are in correction territory, with consumer staples less than 1 percent away. Programming note: Tune in to CNBC at 7 p.m., ET, for special live coverage of the market meltdown.

Cumulative trade volume was 13.94 billion shares, the highest volume day since Aug. 10, 2011. Composite trade volume on the New York Stock Exchange was 6.57 billion shares, the heaviest since Oct. 27, 2011. "This is the proverbial markets hating uncertainty and you've got uncertainty in every driver—Fed, China, oil prices," said Quincy Krosby, market strategist at Prudential Financial. "This is a market in pricing discovery in where prices should be." "The market's going to be focused on China tonight to see if they come on tonight with something that would be considered a viable (way) to stimulate growth in that economy," she said. Read More Don't trust your intuition during this market selloff

The major averages had a volatile day of trade, plunging sharply in the open and more than halving losses to trade less than 1 percent lower on the day, before closing down more than 3.5 percent. "I think we probably rallied too fast. A lot of people that covered their shorts got their shorts covered," said Peter Coleman, head trader at Convergex. He noted the Dow was still trading several hundred points off session lows and that a close better than 500 points lower would be a good sign. The Dow Jones industrial average ended 588 points lower after trading in wide range of between roughly 300 to 700 points lower in the minutes leading up to the close.

Monday's rout extended recent slides in global stocks. The blue-chip index posted its biggest 3-day point loss in history of 1,477.45 points.

In the open, the index fell as much as 1,089 points, making Monday's move its biggest intraday swing in history. In midday trade, the index pared losses to trade about 110 points lower. In the first 90 minutes alone, the index traveled more than 3,000 points in down and up moves. After 11:00 a.m., the index traveled more than 1,800 points, for a total of an approximately 4,900-point move in Monday's trading session.





"I'm hoping for some stability here but I think markets remain very, very vulnerable to bad news (out of) emerging markets," said Dan Veru, chief investment officer at Palisade Capital Management.

He attributed some of the sharp opening losses to exchange-traded funds. "It's so easy to move a bajillion dollars in a nanosecond." Trading in stocks and exchange-traded funds was paused more than 1,200 times on Monday, Dow Jones said, citing exchanges. Such pauses total single digits on a normal day, the report said. An increase or decline of five percent or more triggers a five-minute pause in trading, Dow Jones said. The major averages came sharply off lows in midday trade, with the Nasdaq off as low as less than half a percent after earlier falling 8.8 percent. Apple closed down 2.5 percent after an attempt to rally more than 2 percent. "There was sort of a lack of follow-through after the morning's crazy action in the overall market," said Robert Pavlik, chief market strategist at Boston Private Wealth. "The selling really dissipated once we got to around 10 o'clock." He attributed some of the late morning gains to a short squeeze and bargain hunting. Read MoreDow stocks with the biggest buying momentum

Art Hogan, chief market strategist at Wunderlich Securities, noted that the sharp opening losses were due to great uncertainty among traders and the implementation of a rare market rule. The New York Stock Exchange invoked Rule 48 for the Monday stock market open, Dow Jones reported.

The rule allows NYSE to open stocks without indications. "It was set up for situations like this," Hogan said. Before this week, Rule 48 was most recently invoked in January 2015. In all, Rule 48 has been invoked 67 times since it was approved in 2007, according to an NYSE spokeswoman. The goal of the rule is to ease market volatility. Stock index futures for several major indices fell several percentage points before the open to hit limit down levels.

Circuit breakers for the S&P 500 will halt trade when the index decreases from its previous close by the following three levels: 7 percent, 13 percent, and 20 percent. "Fear has taken over. The market topped out last week," said Adam Sarhan, CEO of Sarhan Capital. "We saw important technical levels break last week. Huge shift in investor psychology." "The market is not falling on actual facets of a sub-prime situation. It's falling on fear of the unload of China. That's really behind this move," said Peter Cardillo, chief market economist at Rockwell Global Capital. The CBOE Volatility Index (VIX), considered the best gauge of fear in the market, traded near 40. Earlier in the session the index leaped above 50 for the first time since February 2009. "When the VIX is this high it means there's some panic out there," said Randy Frederick, managing director of trading and derivatives at Charles Schwab. However, he said with stocks more than halving losses he "wouldn't be surprised if we closed positive." "If you could move it that far you could move it another 350 points" on the Dow," he said. Read More8 things you need to know about bear markets Overseas, European stocks plunged, with the STOXX Europe 600 down more than 5 percent, while the Shanghai Composite dropped 8.5 percent, its greatest one-day drop since 2007. Treasury yields came off session lows, with the U.S. 10-year yield at 2.01 percent and the at 0.58 percent. The U.S. dollar fell more than 1.5 percent against major world currencies, with the euro near $1.16 and the yen stronger at 119 yen versus the greenback. A U.S. Treasury Department spokesperson said in a statement that "We do not comment on day-to-day market developments. As always, the Treasury Department is monitoring ongoing market developments and is in regular communication with its regulatory partners and market participants."

Major U.S. Indexes

The Dow Jones industrial average closed down 588.47 points, or 3.58 percent, at 15,871.28, with JPMorgan Chase falling about 5.3 percent as the greatest decliner. The S&P 500 closed down 77.68 points, or 3.94 percent, at 1,893.21, with energy plunging about 5.2 percent to lead all 10 sectors lower. The S&P 500 firms lost $685 billion in market cap, about $100 billion more than Apple's market cap.

The Nasdaq Composite closed down 179.79 points, or 3.82 percent, at 4,526.25. The Dow transports ended more than 3.5 percent lower to approach bear market territory.

About 10 stocks declined for every advancer on the New York Stock Exchange, with an exchange volume of nearly 1.7 billion and a composite volume of nearly 6.6 billion in the close. Crude oil futures settled down $2.21, or 5.46 percent, at $38.24 a barrel, the lowest since February 2009. In intraday trade, crude oil futures for October delivery fell as much as $2.70 to $37.75 a barrel, a six-and-a-half-year low. Gold futures settled down $6.10 at $1,153.60 an ounce. No major economic data or earnings releases were due Monday. Read MoreTurn those presses back on! QE4 talk kicks in Atlanta Fed President Dennis Lockhart said he expects a rate hike this year and did not repeat a September call. —CNBC's Patti Domm, Gina Francolla and Robert Hum contributed to this report. Correction: This story has been updated to reflect that Rule 48 was last invoked in January 2015, not during the financial crisis, according to NYSE.

