The Dow was set to drop 500 points at the open on Monday as concerns about fresh coronavirus-driven lockdowns and the inability of Congress to agree on more fiscal stimulus raised fears about another hit to the domestic economy.
Shares of airline, hotel and cruise companies led declines in premarket trading, tracking their European peers as the UK signalled the possibility of a second national lockdown.
Another round of business restrictions would threaten a nascent recovery in the wider economy, analysts said, and could spark a flight from equities. The first round of lockdowns in March had led the benchmark S&P 500 to suffer its worst monthly decline since the global financial crisis.
The index has since rebounded, thanks to historic global stimulus, but is on track to halt a five-month winning streak as investors dump heavyweight technology-related stocks.
"We've been in a momentum type trading market now for weeks," said Rick Meckler, a partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.
"When the market ran up, its biggest reason was people wanted to get in before it was even higher. And now we're seeing the reverse process and people are becoming nervous that the almost extraordinary gains for this year will all be given back."
Thomas Mantione, managing director at UBS Private Wealth Management in Stamford, Connecticut, said the passing of U.S. Supreme Court Justice Ruth Bader Ginsburg also decreases the chances of another fiscal stimulus package to help lift the domestic economy from a deep recession.
"You've now put yet another negotiating factor into that fiscal stimulus policy response, which makes it even less likely to pass before the November election," Mantione said.
Congress has for weeks remained deadlocked over the size and shape of a fifth coronavirus-response bill, on top of the approximately $3 trillion already enacted into law.
The CBOE Market Volatility index, a measure of investor anxiety, shot up to its highest level in nearly two weeks.
At 9:04 a.m. ET, Dow e-minis were down 563 points, or 2.04%, S&P 500 e-minis were down 56.25 points, or 1.7%, and Nasdaq 100 e-minis were down 158.25 points, or 1.45%.
Shares in JPMorgan Chase & Co and Bank of New York Mellon Corp fell 3.7% and 3.2%, respectively, after BuzzFeed and other media reported they and other banks moved large sums of allegedly illicit funds over nearly two decades despite red flags about the origins of the money.
Nikola Corp crashed 26.8% after its founder Trevor Milton stepped down as executive chairman following a public squabble with a short-seller over allegations of nepotism and fraud.
General Motors Co, which took an 11% stake in Nikola for about $2 billion earlier this month, slipped 3.2%.
Illumina Inc fell 14% after the gene sequencing company said it would pay $8 billion in cash and stock to buy cancer screening startup Grail Inc.