Stocks dropped to close lower Monday with the Dow logging its worst daily loss since mid-October as investors grappled with the latest policy decisions by President Donald Trump. Wall Street also looked ahead to a heavy week of economic data, corporate earnings and the latest meeting by the Federal Reserve set to begin Tuesday.

The Dow Jones Industrial Average DJIA, -0.87% finished down 122.65 points, or 0.6%, at 19,971.13, dropping below the psychologically important 20,000 level. Earlier, the average was down by as many as 223 points. The last time the average had a worse day was Oct. 11, according to FactSet data. Shares of Caterpillar Inc. CAT, -0.96% , DuPont DD, -2.43% and Chevron Corp. CVX, -0.73% weighed on the average.

The S&P 500 index SPX, -1.11% shed 13.79 points, or 0.6%, to finish at 2,280.90, recovering from a 27-point deficit for its worst one-day performance since Dec. 28. The day’s losses were broad, with nine of the S&P 500’s 11 primary sectors finishing lower, with energy, materials and tech the worst performers.

The Nasdaq Composite Index COMP, -1.07% gave up 47.07 points, or 0.8%, to close at 5,613.71, its worst day since Dec. 30. Earlier, the index was down by as many as 82 points.

The CBOE Volatility index VIX, -2.38% , a measure of investor anxiety, surged 11% in its biggest one-day pop in about five months, though at 11.79 it remains well below its long-term average of 20.

Read:Introducing Trump Today, the daily wrap on what the president did and said

While stocks reacted favorably to Trump’s election in November, with major indexes hitting a series of records as investors bet he would push for lower taxes and deregulation, the first week of his administration was marked by confusion and controversy. Tensions have been high between the U.S. and Mexico, while a public outcry that occurred over a travel ban this weekend sowed further doubts among some analysts that lack of equity volatility could continue.

Read:Wall Street’s Trump optimism comes with heavy dose of uncertainty

Some investors speculated on what weekend moves by the Trump administration to ban immigrants from several predominantly Muslim countries could have on businesses worldwide. Others said it was another reason not to expect the year to go smoothly.

“While we continue to think a Trump victory likely means higher U.S. growth in 2017 than we would have expected three or six months ago, we still think volatility will be a feature of the year,” wrote Deutsche Bank analysts Jim Reid and Craig Nichol, in a note to clients on Monday. “It just seems that there are too many uncertainties, unknowns and major policy changes attached to a Trump presidency for it to be a smooth year.”

The immigration issue may have become the hot key issue to roil markets as it flies against much of the pro-business sentiment that has been assumed to be baked into the Trump agenda. Several executives decried the immigration ban as being bad for business.

The immigration ban “has a lot to do” with the selloff, said Randy Frederick, managing director of trading & derivatives at Schwab Center for Financial Research, in an interview. “Many tech leaders have not been pro-Trump, but here is where it has the potential to hit the bottom line.”

While Trump enjoys status as being one of the most powerful men in the world as the president of the U.S., he also risks going to battle against several of his fellow billionaires, who essentially underpin the workings of the U.S. economy, Frederick said.

Executives from big technology companies such as Alphabet Inc.’s Google Inc. GOOG, -2.37% , Facebook and Microsoft Corp. MSFT, -1.24% were among those who jumped to criticize Trump’s temporary immigration ban.

Read: Pro-immigrant protests continue at airports, cities around U.S.

Read:Does Trump rally face ‘one last meltup’ after Dow 20,000?

Fed meeting, data: In the latest economic data, consumer spending rose 0.5% last month, matching the estimate of economists polled by MarketWatch. That is the biggest increase in spending in December since the last month of 2009. The same report showed a pick up in a yearly comparison of inflation, to its highest since late in 2014. Separately, pending home sales rose 1.6% in December.

Read: Jobs report to give clue on early days of Trump White House

The Federal Open Market Committee’s two-day meeting kicks off Tuesday, with economists widely predicting the central bank will hold pat and leave interest rates unchanged. That means investors will likely focus on “any new guidance on the ‘balance of risks’ statement with respect to policy confidence about further stimulus withdrawal,” said Lena Komileva, chief economist at G+Economics, in a note to clients.

Stocks to watch: The coming week will feature reports from one-fifth of the S&P 500 index, plus five Dow components. Crucial for the consumer-reliant technology sector will be Apple Inc. AAPL, -3.17% on Tuesday and Facebook Inc. FB, -0.89% on Wednesday, while Amazon.com Inc. AMZN, -1.78% reports Thursday.

Read: Outlooks for the Age of Trump are top focus of the earnings season

Delta Air Lines Inc. DAL, -3.29% said domestic flights were resuming after a computer glitch caused cancellations on Sunday night and into Monday. Shares fell 4.1%. The sector, led by a 4.4% loss in American Airlines Group Inc. AAL, -3.22% , was also pressured by Trump’s executive order to restrict immigration as it led to protests at airports across the country. The US Global Jets ETF JETS, -2.88% fell 2.1%.

Energy companies led the S&P 500 index lower with shares of Range Resources Corp. RRC, +1.30% , Chesapeake Energy Corp. US:CHK , Transocean Ltd. RIG, -4.50% and Cabot Oil and Gas Corp. COG, -0.10% all falling more than 5%.

Mylan NV MYL, -2.66% shares declined 0.9% following a report that the drugmaker is facing a U.S. antitrust probe over its EpiPen injector.

Tempur Sealy TPX, -3.54% sank 28% after Mattress Firm terminated contracts with the company.

Other markets: The FTSE 100 Index UKX, -0.70% advanced 0.3% while the Stoxx Europe 600 SXXP, -0.66% declined 0.9%, amid negative reaction to Trump’s immigration ban. In Asia, the Nikkei 225 index NIK, +0.17% closed down 0.5%, largely due to yen strength. Most Asian markets were closed for the Lunar New Year holiday.

Oil prices US:CLH7 fell 1% to settle at $52.63 a barrel, while gold prices US:GCJ7 climbed 0.4% to settle at $1,196.00 an ounce.

—Barbara Kollmeyer in Madrid contributed to this report.