Stocks Plunge to Year's Lows

Updated from 4:05 p.m. EDT

Stocks plummeted Monday to their lowest closing levels of the year as uncertainty about interest rate hikes and geopolitics continued to spook investors.

The Dow Jones Industrial Average posted its biggest loss in two months, losing 127.11 points, or 1.26%, to 9990.23. The blue-chip index closed below 10,000 for the first time since Dec. 10, 2003.

The S&P 500 shed 11.56 points, or 1.05%, to 1087.14, while the Nasdaq fell 21.89 points, or 1.14%, to 1896.07. The 10-year Treasury bond traded down 1/32 in price to yield 4.78%, while the dollar was higher against the yen and euro.

Trading was heavy, with more than 1.9 billion shares changing hands on the New York Stock Exchange, where decliners outnumbered advancers by about 9 to 1. Volume fell just short of that mark on the Nasdaq, where decliners took about a 7-to-2 lead.

Stocks have not been seen at these levels since late March, when the major indices were widely believed to have found the bottom in a temporary correction.

"Investors don't like uncertainty, and various uncertainties out there now, like rising interest rates, rising energy prices, the election and the outcome of the war in Iraq have all become bigger issues that people aren't sure how to deal with," said Michael Sheldon, chief market strategist at Spencer Clarke LLC. "The data shows that investors are certainly becoming more concerned about what's happening in the market, but we haven't seen the kind of panic selling so far that is typically associated with major market bottoms."

Traders looked to gold as a safe haven, sending the CBOE Gold Index up more than 3.2%. Also, a 0.4% the Philadelphia Semiconductor Index was able to post a 0.4% gain in the face of a selloff that touched most sectors.

"You saw continued inflationary fears building into the market, and I think that's also fear that the economic recovery is incredibly fragile, and as soon as the Fed raises rates, even a small amount, everybody's going to stop buying anything," said Ken Tower, chief market strategist with Cybertrader. "I think the market is very oversold here. A bottom is in sight, but right now we're in the steepest portion of the correction, so we could have a couple of nasty days. But improvement isn't too far off."