Stock markets around the world have slumped, with the US market closing below the key 10,000 mark.
Good economic news is not what the markets want to hear
Fears that the US central bank may raise rates to rein in the economy soured the mood, as did high oil prices and global security worries.
The Dow tumbled 163.8 points to 9,953.54 - its lowest since December.
London's FTSE 100 ended 2.3% lower, the Paris Cac-40 shed 2.7% and Frankfurt Dax lost 2.9%, hammered by an earlier 5% slump in Tokyo.
Holland Balanced Fund fund manager Mike Holland, said the negative tone of the US market was set ahead of the bell, with the sell-off overnight in Asia and Europe.
Meanwhile, the world's biggest oil exporter Saudi Arabia attempted to ease concerns about oil prices, saying that producers' cartel Opec, of which it is a key member, should lift output by at least 1.5 million barrels a day.
US-traded oil duly dipped to $39 a barrel, having stood at more than $40 on Friday.
But stock market investors continued to be gripped by fears.
Instead traders have focused on economic data, such as Friday's strong labour market report which showed a sharp rise in employment.
Fears of ongoing unrest in Iraq and terrorism worries have also taken their toll.
According to the US Commerce Department, the world's largest economy created 288,000 new jobs in April, further evidence that not only is growth motoring but that it may now need reining in.
Borrowing costs have been held at 46-year lows in the US as policymakers try to ensure that the economy recovers strongly.
Merrill Lynch calculates that a total of 708,000 new jobs were created between February and April.
The Wall Street firm reckons that the US central bank will increase borrowing costs if that number tops 1 million by the end of this month.
While the effects of higher borrowing costs are not expected to be immediate, there are concerns that it may dampen consumer demand and corporate spending.
European shares have rebounded in the past 18 months as company profits slowly recovered and amid optimism that exports to the US will benefit from renewed growth.
Some investors are now saying that the gains may have come too quickly and the market is in need of a short breather.
Especially as the oil price has been surging towards highs last seen in October 1990, following Iraq's invasion of Kuwait.
In New York, a barrel of oil was trading at under $39 for the first time in a week, down from its record of $41.15. In London, a barrel of Brent crude was changing hands for about $36.
That is boosting the cost of petrol and many raw materials, and has prompted several airlines to warn that they may have to increase prices.
Saudi Arabia on Monday called on Opec to increase crude oil flows by at least 1.5 million barrels, or 6%, a day to ease pressures.
The country's oil minister Ali Naimi said: "We do not want to see prices rise to the level that they negatively affect the growth of the international economy or the demand for oil."
Analysts said that as Opec was already exceeding its production quotas, it was unclear whether raising the official threshold would have much effect on world oil prices.
"The existing quota of 23.5 million barrels a day has been exceeded by about 2.2 million barrels a day, so current production is much higher than the current quota," Leo Drollas, chief economist at the Centre for Global Energy Studies, told the BBC's World Business Report.
"What they've suggested is that they increase the quota by 1.5m barrels a day, but in practical terms this doesn't mean anything because they're already producing about 700,000 barrels a day above the new quota."