Wall Street closes in the red, triggered by selloff in China and anxiety over the Fed's next move

Wall Street ended the day sharply down Monday as investors juggled risks on several fronts.

The Dow Jones Industrial Average fell by 972 at its session low, closing with a decline of more than 614 points, or 1.8 percent. The S&P 500 fell by 1.7 percent for its worst day since May, and the tech-heavy Nasdaq was down 2.2 percent.

Fueling the market selloff was a global malaise emanating from the potential meltdown of China property giant Evergrande, heavily indebted and dangerously close to collapse as it seeks to raise funds to pay off $300 billion in liabilities.

Investors were also nervous ahead of this week's meeting of Federal Reserve officials, who will reveal their "dot plot," or summary of economic projections that will indicate how many voting members are considering a rate hike — and how soon.

The market is also anxious that Federal Reserve Chairman Jerome Powell will signal a time frame for withdrawing the central bank's "easy money" policy, a series of emergency measures that have supported the economy since the start of the Covid-19 pandemic. In his post-meeting press conference Wednesday afternoon, Powell is expected to point to a rising inflation index, improvement in the unemployment landscape, and recent positive manufacturing metrics as evidence of a growing economy.

Meanwhile, brinkmanship in Washington, D.C., over raising the debt limit, is fraying nerves and contributing to the selloff. In a weekend opinion piece in The Wall Street Journal, Treasury Secretary Janet Yellen warned that failing to raise the debt limit "would produce widespread economic catastrophe. In a matter of days, millions of Americans could be strapped for cash. We could see indefinite delays in critical payments. Nearly 50 million seniors could stop receiving Social Security checks for a time. Troops could go unpaid. Millions of families who rely on the monthly child tax credit could see delays.”

Bitcoin, crude oil and shares of companies such as Boeing, JPMorgan Chase and General Motors all slid Monday, while the Cboe volatility index, or "fear gauge," soared to its highest reading since May.

Strategists at Morgan Stanley warned of downside risks and a "rolling correction" in the S&P 500.