An earlier version of this article stated that it was the worst start to a December for the Dow Jones Industrial Average and S&P 500 index since 1931, but the indexes narrowly missed that dubious distinction, paring their worst levels at Monday’s close. It remains the worst start to a December for the S&P 500 and the Dow since 1980, according to Dow Jones Market Data. The error has been corrected.

U.S. stocks finished sharply lower Monday in a volatile session that saw the S&P 500 and Nasdaq post fresh year-to-date closing lows, extending the worst start to a December since 1980.

How did the benchmarks trade?

The Dow Jones Industrial Average DJIA, +0.41% retreated 507.53 points, or 2.1%, at 23,592.98, the S&P 500 SPX, +0.48% fell 54.01 points, or 2.1%, at 2,545.94, and the Nasdaq Composite Index COMP, +0.67% retreated 156.93 points to 6,753.73, a drop of 2.3%.

The S&P 500 closed at its lowest level since October of 2017, the Nasdaq finished at its lowest since November of 2017, while the Dow closed at lowest level since March 23, according to Dow Jones Market Data.

Read: Here’s why the Fed won’t save the stock market, despite its worst December start since 1980

What drove the market?

With just a handful of trading sessions left in 2018, investors remained unhinged by the major macro headwinds that have buffeted markets in recent months: rising interest rates, slowing global growth and U.S.-China trade tensions.

Of particular interest is the Federal Reserve, which will conclude its final policy meeting of 2018 on Wednesday. Although the market is widely expecting a rate increase of a quarter of a percentage point, more influential investors from Stanley Druckenmiller to Jeffrey Gundlach have called on the Fed to take a wait-and-see approach and decline to hike rates this week.

This reflects the bearish sentiment that has consumed investors in recent weeks and which helped fuel Monday’s selloff. As recently as September, the central bank was projecting a rate increase this week, plus three more in 2019.

Since that time, evidence of slowing global growth, a rising dollar and slower inflation has helped encourage Fed officials to become more dovish in their public statements, while fed funds futures markets show investors predict only one or no rate increases next year.

These same factors, plus fears that the Fed won’t respond dovishly enough, are causing anxiety on Wall Street, as the bulls and bears debate whether the current pullback is another in a series of corrections that have dotted the nearly 10-year-old bull market, or the beginning of a lasting bear market.

On Friday, evidence of the effects of rising U.S.-China trade tensions, and of a broader slowing of the Chinese economy, cropped up as China released data that showed both industrial output and retail sales for November missed economists’ forecasts.

A slowing Chinese economy underscores the importance of continuing U.S.-China trade negotiations, and leaders of both nations have been eager to promote optimism that a deal will be reached before the Trump administration’s March 1 deadline, when it said it would raise tariffs on Chinese imports further.

Traders are therefore also looking forward to speech by President Xi Jinping, to be delivered Tuesday morning in Beijing on the topic of economic reform, for any hints as to the trajectory of trade negotiations.

What are analysts saying?

Vincent Reyes, director of trading operations at SEIA, blamed Monday’s selling on growing fears over Wednesday’s policy announcement from the Federal Reserve.

“The market feels like the Fed has to hike Wednesday,” to protect its image of independence amid calls from the president to stop raising rates, he told MarketWatch. “But the logic for hiking is weak.”

Reyes pointed to an interview with Gundlach as one possible reason losses accelerated Monday, after the famed investor told CNBC that he thinks we are already in a bear market.

Randy Frederick, managing director of active trading and derivatives at Charles Schwab blames Monday’s downturn on macro headwinds, “and the lack of any good news for traders to turn to.”

“Today’s gyrations are typical with this level of volatility,” he told MarketWatch, arguing that with strong evidence of slowing global growth, investors will need convincing evidence that the U.S. economy can withstand difficulties abroad before jumping back into the market.

Unfortunately, he sees little hope for such evidence before corporate earnings season in mid-January. “Anybody hoping for a Santa Claus Rally this year will be disappointed,” he said.

“The problem for investors is that even if you do get better news on trade, and get better news from the Fed, you still have the problem of slowing growth,” Alec Young, managing director of global markets research at FTSE Russell, told MarketWatch.

“You can argue the market looks cheap,” he added, “but there is a lack of a catalyst” to reverse increasingly negative sentiment. “People have been buying the dips, but it’s just not working, and at a certain point that will lead to a buyer’s strike,” Young argued.

What data were in focus?

A reading of industrial activity in the New York region, the Empire State index for December, showed manufacturing activity growing at a sharply slower pace compared with November. The index fell 12.4 points to 10.9 in December, below consensus expectations of 21, according to a survey by Econoday.

Home builders’ confidence tumbled in December, according to the National Association of Home Builder’s monthly index, which fell to 56 in December, its lowest level since May 2015.

What stocks were in focus?

Shares of Best Buy Co Inc. BBY, -0.52% were in focus after Bank of America downgraded the stock to underperform. The stock fell 5.7% Monday.

Johnson & Johnson JNJ, +0.15% shares remained under pressure Monday, with the stock slipping 2.9%, after a more than 10% decline Friday following allegations that it knew that its popular baby powder product was contaminated with asbestos.

Jack in the Box Inc. JACK, +0.71% stock rose 2.1% Monday, after the firm disclosed that it is exploring a possible sale.

Goldman Sachs Group Inc. GS, +5.06% shares fell 2.7%, after the Malaysian government filed criminal charges against the bank and one of its former partners, in connection with the 1MDB financial scandal.

How did other markets trade?

Asian stocks closed mixed Monday, with the Nikkei NIK, -1.10% rising 0.6%, Hong Kong’s Hang Seng HSI, -1.81% virtually unchanged and the Shanghai Composite Index SHCOMP, -1.72% edging 0.1% higher.

In Europe, stocks closed broadly lower, with the Stoxx Europe SXXP, -1.02% and FTSE 100 UKX, -1.29% retreating on Monday.

Crude oil US:CLF9 reversed earlier gains, down 4%, while gold advanced nearly 0.7% and the U.S. dollar retreated 0.3%.