New York • U.S. stocks plunged to their worst loss of the year Monday, and investors around the world scrambled to sell on worries about how much President Donald Trump’s worsening trade war will damage the global economy.

China let its currency, the yuan, drop to its lowest level against the dollar in more than a decade, a move that Trump railed against as “currency manipulation.” It also halted purchases of U.S. farm products. The moves follow Trump’s tweets from last week that threatened tariffs on about $300 billion of Chinese goods, which would extend tariffs across almost all Chinese imports.

The escalating dispute between the world’s largest economies is rattling investors unnerved about a global economy that was already slowing and falling U.S. corporate profits. The S& P 500 dropped 87.31 points, or 3%, to 2,844.74 for its worst loss since December, when the market was wrapped in the throes of recession fears. It was down as much as 3.7% in the afternoon.

On Monday:
• The S&P 500 dropped 87.31 points, or 3%, to 2,844.74.
• The Dow Jones Industrial Average lost 767.27, or 2.9%, to 25,717.74.
• The Nasdaq composite fell 278.03, or 3.5%, to 7,726.04.
• The Russell 2000 index of smaller companies gave up 46.25, or 3%, to 1,487.41.


For the year:
• The S&P 500 is up 337.89 points, or 13.5%.
• The Dow is up 2,390.28 points, or 10.2%.
• The Nasdaq is up 1,090.76 points, or 16.4%.
• The Russell 2000 is up 138.85 points, or 10.3%.

The sell-off began Monday in Asia, where indexes lost more than 1%, and intensified as it swept westward through Europe to the Americas. Investors in search of safety herded into U.S. government bonds, which sent yields plunging.

The yield on the 10-year Treasury note, which rises with expectations of stronger economic growth and inflation, fell to its lowest level since Trump’s 2016 election energized markets, down to 1.72% from 1.85% late Friday. The yield on the two-year note, which is more influenced by interest-rate moves from the Federal Reserve, sank to 1.58% from 1.71%.

Both are unusually large moves.

A warning light of recession in the bond market also began shining more brightly, which traders said may have added to the selling pressure on stocks. When short-term Treasury yields are higher than long-term rates, a rule of thumb says a recession may arrive in about a year.

The three-month yield was at 2.00% Monday afternoon, 0.28 percentage points higher than the 10-year’s yield. A month ago, it was 0.21points higher.

Of course, the U.S. economy is still growing, the unemployment rate remains close to its healthiest level in nearly half a century and U.S. stock indexes set record highs just over a week ago. But the escalating trade tensions and investors’ disappointment that the Federal Reserve didn’t commit to a lengthy series of interest-rate cuts at its meeting last week have since sent the S& P 500 on a six-day losing streak, its longest since October. The S& P 500 is 6% below its record.

“A recession is still unlikely, but the probability of it is higher, still at less than 20%,” said Nate Thooft, head of global asset allocation at Manulife Investment Management.