Stocks were sharply lower Monday as global fears over China's economy and Middle East tensions flared. 

The Dow Jones Industrial Average slid 2%, or 352 points, in its worst start to the year since 1932, the middle of the Great Depression. The S&P 500 fell 2%, and the Nasdaq tumbled 2.5%. The Volatility Index (VIX.X , otherwise known as the "fear index,"' spiked 19% to 21.69.

"Today's turbulence is only the beginning," said Nigel Green, CEO and founder of financial consultancy deVere Group. "There's a cocktail of uncertainty with the main ingredients including China's economic woes, higher interest rates in the U.S., historically low oil prices ... and increasing tensions in the Middle East."

China's Shanghai Composite plummeted 7% before triggering a trading halt after manufacturing activity contracted for the 10th straight month. The official manufacturing PMI came in at 49.7, while Caixin manufacturing PMI fell to 48.2. A reading below 50 indicates contraction. China's economic growth came under scrutiny in 2015 as data indicated a steeper slowdown than feared.

Global markets were also lower after Saudi Arabia severed diplomatic relations with Iran on Sunday. Protesters torched a Saudi Arabian Embassy in Tehran on Saturday in response to Saudi Arabia's execution of 47 prisoners, including Shiite cleric Nimr Baqr al-Nimr.

Two separate reads on U.S. manufacturing showed the sector in strife. The latest PMI Manufacturing Index fell to 51.2, its lowest level since October 2012. A separate survey showed activity in contraction. Manufacturing fell to 48.2 in December, its second straight month in contraction, according to the ISM Manufacturing Index. 

Construction spending unexpectedly declined in November, the first and biggest drop in 17 months. Spending in the U.S. fell 0.4% in November after a 0.3% increase a month earlier, according to the Commerce Department.

High-momentum tech stocks, typically the hardest hit during selloffs, were the worst performers on markets Monday. Amazon (AMZN - Get Report) , Apple (AAPL - Get Report) , Microsoft (MSFT - Get Report) , Alphabet (GOOGL - Get Report) and Facebook (FB - Get Report) were all sharply lower, while the Technology Select Sector ETF (XLK - Get Report) fell 2.4%.

Netflix (NFLX - Get Report) was the biggest laggard on the S&P 500, falling more than 6%, after Baird Equity Research downgraded to 'neutral.' Analysts said they expect to see another month of weak U.S. subscriber additions, while international strength has already been priced in.

Volkswagen (VLKAY shares fell more than 3% after the Department of Justice filed a civil lawsuit against the automaker over its Clean Air Act violations. Shares have fallen more than 20% since mid-September when news broke that Volkswagen had installed emissions test-gaming software in its vehicles. 

Shire (SHPG is in advanced talks to acquire Baxalta (BXLT for around $32 billion in cash and stock, or around $46.50 to $48 a share, sources told Bloomberg. A deal could be announced as soon as this week after final details are negotiated. A combined company would generate $20 billion in sales by 2020.

General Motors (GM - Get Report) announced plans to contribute $500 million to ride-sharing company Lyft in its latest $1 billion round of fundraising. The automaker will receive a seat on the board and access to the company's software. GM models will also become the official preferred vehicles for drivers. GM also announced that CEO Mary Barra was named chairwoman.

Nokia (NOK - Get Report) climbed 1% after officially gaining control of Alcatel-Lucent (ALU through an all-share deal. Nokia will hold 79% of Alcatel shares and expects to become a fully-functional combined group by the middle of the month.

American Express (AXP - Get Report) and Bank of America (BAC - Get Report) were under pressure after Fidelity Investments dropped the two as credit card partners after 12 years. Visa (V - Get Report) and U.S. Bancorp (USB - Get Report) will take over as the network and issuer of the Fidelity card.

Tesla (TSLA - Get Report) shares tumbled more than 4% on Monday after the automaker said it delivered 17,400 cars in the fourth quarter, up from 11,603 in the previous quarter. The company said it delivered 50,580 Model S sedans and Model X sport utility vehicles in 2015, falling at the low end of previous guidance.

Disney's (DIS - Get Report) Star Wars: The Force Awakens is set to become the highest-grossing film of all time in North American theaters this week. Avatar had previously held the title. The domestic gross for the film currently stands at $740.3 million, while globally it has generated $1.5 billion.