NEW YORK -- U.S. stocks dropped sharply Monday after a plunge in Chinese markets triggered by weak Chinese manufacturing data and escalating tensions in the Middle East. The Dow Jones industrial average sank 2 percent following a rout that stretched across Asia into Europe.
The Shanghai Composite Index dived 6.9 percent to its lowest level in nearly three months. The drop led the Shanghai and Shenzhen stock markets to halt trading for the remainder of Monday to avert steeper falls, the official Xinhua News Agency said.
It was the first time China used the "circuit breaker" mechanism it announced late last year.
Chinese authorities have been trying for months to restore confidence in the country's stocks after a plunge in prices in June rattled global markets and prompted a panicked, multibillion-dollar government intervention. Beijing is gradually unwinding emergency controls that included a freeze on new stock offerings.
Concerns about China's economic slowdown were revived by weak manufacturing data released Monday, along with Middle East tensions, which pushed up oil prices.
The Dow Jones index sank 442 points, or 2.5 percent, to 16,982 as of 11:05 a.m. Eastern time. The Standard & Poor's 500 index lost 51 points, or 2.5 percent, to 1,993. The Nasdaq composite gave up 153 points, or 3 percent, to 4,853.
"The market is trying to anticipate the global growth story," said Kevin Kelly, CIO of Recon Capital Partners. He added, "It's going to be a turbulent year. This isn't a blip."
The jitters extended to Europe. The DAX index in Germany, whose export-led economy is sensitive to the fortunes of China, tumbled 4.3 percent. Britain's FTSE 100 fell 2.3 percent while France's CAC 40 dropped 2.8 percent.
Huang Cengdong, an analyst for Sinolink Securities in Shanghai, said selling accelerated as investors tried to lock in trades before trading was halted. He expects further turmoil ahead of corporate earnings reports.
"The market will not improve because there will be heavy selling in the near future," said Huang.
Elsewhere in Asia, Japan's Nikkei 225 tumbled 3.1 percent and Hong Kong's Hang Seng retreated 2.7 percent. South Korea's Kospi closed 2.2 percent lower. Stocks in Australia, Taiwan and Southeast Asia were also lower. Stocks in Australia, Taiwan and Southeast Asia were also lower.
The Caixin/Markit index of Chinese manufacturing, which is based on a survey of factory purchasing managers, fell to 48.2 points in December from 48.6 the previous month, marking contraction for the 10th straight month.
It was the latest sign of the headwinds facing China's economy that add to a downbeat outlook for Asian exporters. On Friday, an official manufacturing index also showed a persistent contraction in factory activity despite Beijing's stimulus measures.
China's factory data is "still a long way off stirring up cheer about global demand recovery," said Mizuho Bank Ltd. in a daily commentary. "Asian exporters are expected to continue struggling with exports contraction and growth prospects dampened by related manufacturing gloom."
Escalating tensions in the Middle East worried investors and briefly sent the price of oil higher. Saudi Arabia said Sunday it is severing diplomatic relations with Iran, a development that could potentially threaten oil supply. The world's largest oil supplier executed a prominent Shiite cleric that prompted protesters to set fire to the Saudi Embassy in Tehran and Iran's top leader to criticize Saudi Arabia.
"Oil markets will be concerned that this could be an incremental step in a deteriorating political situation that might ultimately threaten world oil supply," Ric Spooner, chief analyst at CMC Markets, said in a commentary.
Benchmark U.S. crude gave up an early gain and was down slightly in late morning trading in New York. Oil was down 30 cents to $36.70 a barrel in New York Mercantile Exchange. It traded over $38 a barrel earlier in the day. Brent crude, which is used to price international oils, was little changed at $37.27 a barrel in London.
Oil and gas producers, which were battered last year, were among the few stocks in the S&P 500 to rise. Southwestern Energy climbed 21 cents, also 3 percent, to $7.31 and Consol Energy rose 6 cents, or 1 percent, to $7.96.
In other trading, some of the biggest decliners in the U.S. were companies that sharply outpaced the market last year. Netflix and Amazon, both of which more than doubled in price in 2015, were down sharply. Netflix sank $6.98, or 6 percent, to $107.43 and Amazon gave up $34.63, or 5 percent, to $640.14.
On the whole, technology was the weakest among the 10 sectors in the S&P 500 index. It was one of the better-performing industries in the market last year.
In currencies, the dollar weakened to 119.19 yen from 120.23 yen. The euro fell to $1.0809 from $1.0858.
In government bond trading, U.S. bond prices rose. The yield on the 10-year Treasury note fell to 2.21 percent from 2.27 percent.
AP researcher Fu Ting in Shanghai contributed to this report.