Dow Jones Industrial Average Ends Day Down 1,175 Points

The Dow Jones industrial average plunged 1,175 points, or 4.6%, erasing its gains for the year.

The Dow's drop Monday was its biggest in terms of points, but it had a larger percentage drop as recently in 2011.

The Dow is down 8.5% from the record high it hit in late January.

At one point the Dow was down as much as 1,600 points.

The Dow ended at 24,345.

The Standard & Poor's 500, the benchmark for many index funds, fell 113  points, or 4.1%, to 2,648. The Nasdaq fell 273, or 3.8%, to 6,967.

Bond prices rose. The yield on the 10-year Treasury fell to 2.73%.

The market's slump began on Friday as investors worried that creeping signs of higher inflation and interest rates could derail the market's record-setting rally.

The two-day losing streak was sparked by a pickup in wages, which could usher in higher inflation. Average hourly earnings, which had been rising at a modest 2.5% in the recovery, increased by 2.9% from the year before, the Labor Department said on Friday. Some sectors also showed weakness, including banks following the punitive action by the Federal Reserve against Wells Fargo (WFC).

The two-day slump has wiped out the stock market's gains so far this year. Investors are concerned that the recent period of low inflation and low interest rates may be coming to an end. Higher borrowing costs could eat into corporate profits, while also slowing down the market for houses, cars and other items bought using credit.

Prior to Monday, the biggest one-day drop in the Dow was on September 29, 2008, when the index plunged 777.68 points, or about 7%. 

(The Associated Press, CBS News contributed to this report.)