The slowdown is adding to Caterpillar's problems, and its fourth-quarter profit fell short of Wall Street expectations. It reported a 43 percent drop in operating profit for the quarter through last month. "China is such a big part of so many companies' earnings picture", said Rick Meckler, a partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.
The stock fell 6 percent to $128.71 in premarket trading.
The macro assessment, along with a slight reduction to the outlook, was "not as bad as feared", Deane Dray, an analyst with RBC Capital Markets, said in a client note.
Ahead of the opening bell, chipmaker Nvidia announced that it lowered the expected revenue for the fourth quarter to $2.2 billion from $2.7 billion.
The Dow Jones Industrial Average fell 291.41 points, or 1.18 percent, to 24,445.79. The yuan appreciated to its strongest against the dollar since July before Vice Premier Liu He travels to Washington for trade talks, and as the People's Bank of China freed up a potential US$37 billion for bank lending.
The Philadelphia semiconductor index fell 2.1%, while the S&P technology index dropped 1.8%.
The NASDAQ was dragged down by shares of Nvidia and Facebook, Apple, Amazon and Apple, which posted losses of 0.9 percent or greater.
The beginning of the week started with investors displaying a weak sentiment towards the futures market as the U.S Stock Index Futures shows a downward trend.
The FTSEurofirst 300 index of leading regional shares closed down 0.96 percent while MSCI's all-country world equity index declined 0.62 percent. Fear of a potential recession took its toll on the stock market at the end of 2018, and the S&P 500 fell almost 20 percent between setting its record on September 20 and Christmas Eve. China industrial profit registered two consecutive monthly falls in December 2018, on slowing prices and weaker factory activity, suggesting that government's fiscal stimulus so far is insufficient to lift growth.
"But the complication of volatility being uncomfortable and the fact we're later in the (business) cycle, that's why we're seeing these larger reactions to market news than we're used to", she said.
ENERGY: U.S. crude oil fell 3 per cent to $52.07 per barrel in NY. Brent crude, the global benchmark, fell 2.2% to $60.25 a barrel.
The price of oil did not have a big reaction to the Trump administration imposing sanctions Monday on the state-owned oil company of Venezuela.
The world's second-largest economy, which contributes about one-third of global growth, has been weakening for years after averaging more than 10 percent growth for three decades through 2010.
The dollar slipped to 109.36 Japanese yen from 109.64 yen late Friday. "However, when we look out into our guidance for 2019 we expect total excavator sales to be about flat year-on-year" in China.