U.S. stocks tumbled on Monday alongside other risky assets globally as Ukraine and Russia prepared for possible war after Russian President Vladimir Putin declared he had the right to invade his neighbor.
Ukraine mobilized for war on Sunday and Washington threatened to isolate Russia economically as Moscow's biggest confrontation with the West since the Cold War unfolded.
The S&P 500 had closed at a record high on Friday, and profit-taking was expected on Wall Street due to the political uncertainty. The index found some support when it fell to 1,840, but broke through it after the first attempt. The S&P 500 extended losses in early afternoon trading and then recovered slightly to hover near the support level.
"There's been a very significant rally," said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey. "If you need an excuse to sell, this is a good one."
Russian stocks and bonds fell sharply and the central bank raised interest rates to defend the ruble. The MICEX index of Moscow stocks tumbled 10.8 percent to 1,288.81. The dollar-denominated RTS stock index dropped 12 percent.
The market rout highlighted the damage that the crisis could do to Russia's vulnerable economy, making it harder to balance the budget and potentially undermining business and public support for Putin.
The Market Vectors Russia ETF fell 8.9 percent in heavy volume, hitting a session low of $22.16, its lowest in 4-1/2 years.
Energy stocks could lose if relations between the United States and Russia deteriorate further. Volatility is likely to spike alongside the uncertainty of the situation.
"Anything that involves a boycott of Russian supplies, which are very significant, could impact the energy sector dramatically," said Meckler.
"In situations like this, you see very quick reactions reverse as people understand the scenario and how things play out."
Both Brent and U.S. crude prices rose more than 2 percent each. The S&P energy sector index, which opened higher, was down 0.6 percent.
The Dow Jones industrial average fell 207.75 points or 1.27 percent, to 16,113.96. The S&P 500 lost 19.45 points or 1.05 percent, to 1,840. The Nasdaq Composite dropped 58.584 points or 1.36 percent, to 4,249.534.
Gold prices hit a four-month high as investors sought safe-haven assets, boosting gold stocks. U.S.-traded AngloGold Ashanti shares gained 2.5 percent to $18.01.
Though the focus will likely remain on Ukraine, the economic calendar was busy on Monday. U.S. factory activity rebounded from an eight-month low in February and consumer spending rose more than expected in January, suggesting the economy was regaining some strength after a recent slowdown.