NEW YORK (TheStreet) -- Stocks moved off of session lows by late afternoon Monday, but that was little comfort to investors who could say "goodbye" to billions of dollars by the close of the trading day.

The S&P 500 was down 3.3%. The benchmark index teetered in and out of correction territory throughout the session after falling nearly 10% from its May record.

The Dow Jones Industrial Average recovered from a 1,000-point drop seen at the beginning of the session, but remained down 3% or 485 points. 

The Nasdaq fell 2.9%, dragged down by losses in high-momentum tech stocks such as Apple (AAPL - Get Report) and Netflix (NFLX - Get Report) .

Markets plunged after China's Shanghai Composite plummeted 8.5% overnight in what has been dubbed 'Black Monday.' The drop was its biggest one-day percentage decline since early 2007, pushing the index into negative territory for 2015. The index crumbled more than 10% last week after manufacturing data reinforced fears the world's second-largest economy was undergoing a significant slowdown.

But some economists, and investors, believe the selloff was overdone. 

"The current panic is essentially 'made in China.' The recent data from other major economies have generally been good and there is little to justify fears of a major global downturn," Capital Economics analysts wrote in a note. "Worries about the economic fallout from the slump in Chinese equities are overdone -- even in respect of the impact on China itself. What's more, the recent slump has simply taken the Shanghai composite index back to where it was earlier in the year."

World markets fell in-step with China's stock market. European markets such as Germany's DAX, France's CAC 40, and the FTSE 100 in London plummeted more than 4%, while Japan's Nikkei fell 4.6% and the Hang Seng slid 5.2%.

Global volatility could give the Federal Reserve pause in deciding when to raise interest rates from crises levels, according to Barclays analysts. The investment firm pushed out its forecast for the first hike from September 2015 to March 2016, though a December hike would be possible if volatility proves transitory. 

"We believe the FOMC will delay the start of the rate hike cycle beyond September as a means to offset tighter financial conditions while it evaluates the effect of recent volatility," Barclays analysts wrote in a note. "In addition to worsening financial market conditions, our decision to delay our outlook for the tightening cycle stems from the effects of a stronger U.S. dollar, lower oil prices, and weak global demand on our outlook for US inflation."

The energy sector led markets lower on Monday as crude oil was poised to close below $40 a barrel for the first time since 2009. Crude oil plummeted to its lowest level in six-and-a-half years on fears a slowdown in China would hurt demand while the Organization of Petroleum Exporting Countries continued to pump out supply at record highs. West Texas Intermediate crude was down 4.4% to $38.69 a barrel.

Exxon Mobil (XOM - Get Report) , Chevron (CVX - Get Report) , Schlumberger (SLB - Get Report) , ConocoPhillips (COP - Get Report) , Royal Dutch Shell (RDS.A - Get Report) and BP (BP - Get Report) were among the worst performers in the energy sector. The Energy Select Sector SPDR ETF (XLE - Get Report) dropped 4.4%.

Casino stocks with exposure to Asian gambling destination Macau were sharply lower. Melco Crown Entertainment (MPEL) slid 6.6%, Las Vegas Sands (LVS - Get Report) fell 3.6%, Wynn Resorts (WYNN - Get Report) was down 4.9%, and MGM Resorts (MGM - Get Report) tumbled 6%.

U.S. bonds saw increased demand on Monday as investors sought a safe-haven asset in light of the increased risk of equities. U.S. 10-year bond yields fell below 2% for the first time in 4 months before reversing to reclaim a yield of 2.0278%. 

Benchmark indexes closed their worst week in nearly four years last week as a continued slowdown in China spooked equity and commodity traders. The S&P 500 was down 3.2% for the day and 7.5% since its May high, near the 10% decline which would constitute a correction.