U.S. stocks tumbled Monday, with the Dow recording its worst one-day point drop in history, in a selloff that at times took on the characteristics of a panic. The Dow was down more than 1,500 points at its session low, while the S&P 500 logged its first 5% pullback from its all-time high in over a year.

The day’s weakness was broad based, with all S&P 500 sectors down and all 30 Dow components finishing lower. The Cboe Volatility Index VIX, -2.38% , Wall Street’s so-called fear gauge, surged 104% to 35.02, its loftiest level since August 2015, according to FactSet.

How did the main benchmarks perform?

The S&P 500 SPX, -1.11% dropped 113.19 points, or 4.1%, to 2,648.94. The large-cap index is now off more than 5% from its all-time intraday high of 2,872.87 on Jan. 26. The S&P 500 had gone 406 sessions without such a decline, marking the longest period without a 5% pullback in 20 years.

The Dow Jones Industrial Average DJIA, -0.87% slumped 1,175.21 points, or 4.6%, to 24,345.75, not up all its 2018 gains. The S&P 500’s percentage drop was the largest since Aug. 18, 2011, while the Dow’s drop was the biggest since Aug. 10, 2011. The S&P 500 and Dow both turned negative for the year.

The Nasdaq Composite Index COMP, -1.07% shed 273.42 points, or 3.8%, to end at 6,967.53. However, the tech-heavy index managed to cling to a 2018 gain of 0.9%.

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The financial sector was the biggest loser, tanking 5%, followed by health care, industrials, energy, telecommunications, and information technology which all fell more than 4%.

Friday had represented the biggest one-day drop for the S&P since September 2016, and capped the worst weekly decline for both the Dow and the S&P in more than two years. The selloff followed a stronger-than-expected jobs report, which investors took as a sign the Federal Reserve could be more aggressive in raising interest rates than previously expected.

What drove the markets?

Rising bond yields could continue to peel some money away from equities. The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, 0.701% at one point reached as high as 2.883% but subsequently dropped back to 2.72% as the equity rout triggered a flight to quality that boosted haven assets. Yields and debt prices move in opposite directions.

The 10-year yield had traded at a four-year high in the wake of Friday’s monthly jobs report that revealed a jump in wage growth. That stoked inflation fears as Jerome Powell formally took over as chairman of the Federal Reserve on Monday, replacing Janet Yellen.

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What were strategists saying?

Michael Wilson, chief U.S. equity strategist at Morgan Stanley, said he is in no rush to buy the dip as there are growing worries about “unfunded” fiscal spending and a Federal Reserve that “appears to be behind the curve” when it comes to rates.

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“The panicky selloff and partial recovery was driven by algorithmic programs, because humans don’t make decisions that fast. It’s a mini flash crash,” said Kim Caughey Forrest, senior analyst and portfolio manager at Fort Pitt Capital Group. “To be honest, we were getting uncomfortable by the relentless rally, so this market now seems a lot more normal,” Forrest said.

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“Unlike Friday, when selling was orderly and not on a huge volume, today’s selloff was definitely panicky,” said Joe Saluzzi, partner, co-head of Equity Trading at Themis Trading. “Today’s volume is well over 10 billion and all the buyers disappeared.”

Randy Frederick, vice president of trading and derivatives for Charles Schwab, noted that stocks have “been going almost straight up since the start of the year,” which meant a pullback was both “expected and healthy” in his view. “It doesn’t mean the bull market is over; it simply takes away some of the froth and irrational exuberance from stocks and puts us back on a more sustainable trendline.”

Bank of America Merrill Lynch warned Friday that a sell indicator has been triggered for the market as $102 billion has flowed into global equities in 2018. That is amid widespread concerns over valuations.

Which stocks were key movers?

Wells Fargo Inc. WFC, +0.08% skidded 9.2% after the bank said Federal Reserve sanctions over customer-accounts scandals could cut into profit by as much as $400 million this year. The stock was the biggest decliner among financial shares, although the sector was broadly lower.

Bristol-Myers Squibb Co. BMY, -0.21% fell 4% despite reporting positive results for advanced lung-cancer trial results, along with fourth-quarter profit and revenue beats.

Qualcomm Inc.’s stock QCOM, -3.64% slid 6.6%, erasing a premarket gain that came after Broadcom Ltd. AVGO, -1.69% boosted its bid to buy the chip maker by 17% to a “best and final offer” of $82 a share. Broadcom was down 3.1%.

Corcept Therapeutics Inc. CORT, +4.50% tumbled 26% after the drugmaker disclosed that it had been informed Teva Pharmaceutical Industries Ltd. TEVA, +2.04% had submitted a new drug application for a generic version of Corcept’s hyperglycemia treatment Korlym. U.S.-listed shares of Teva fell 4%.

What are economic data saying about the economy?

On Monday, the IHS Markit purchasing managers index for services fell to 53.3 in January from 53.7.

A survey that tracks the performance of service-oriented companies such as hotels, restaurants and banks surged in January to a 13-year high of 59.9, the Institute for Supply Management said. Employment activity set a record.

How did other assets fare?

European stocks SXXP, -0.66% were a sea of red, while Asian markets suffered a broad selloff, with the Nikkei 225 index NIK, +0.17% tumbling 2.5%, its biggest one-day drop since Nov. 9, 2016.

Gold futures US:GCG8 were sightly firmer, while oil futures US:CLH8 dropped sharply and the ICE U.S. Dollar Index DXY, +0.03% rose 0.4%.

Digital currencies continued their recent retreat as bitcoin BTCUSD, +0.79% traded slightly above $7,000, trading at levels last seen in November. The world’s largest cryptocurrency has lost more than half its value since a high reached in December.

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—Anora Gaudiano contributed to this report