A selloff in emerging markets sent a cold chill down Wall Street, triggering a slide on Friday and making January its worst month since May 2012 after one of its best years in more than a decade.
For January, the Dow tumbled 5.3 percent and the S&P 500 slid 3.6 percent - their worst monthly percentage declines since May 2012.
The January loss followed the S&P 500's gain of 30 percent in 2013 - its best year since 1997. It also marked the first time that the S&P 500 ended January with a loss since 2010, when the benchmark index started the year with a drop of 3.7 percent.
In Friday's session, energy and consumer discretionary shares had the biggest declines of the day after some disappointing earnings. The S&P energy index ended the day down 1.5 percent, while the consumer discretionary index fell 1.3 percent. Chevron Corp and Amazon.com were among the biggest drags.
Trading was volatile during the session, with the Nasdaq briefly edging into positive territory and the CBOE Volatility Index - also known as the fear index - briefly turning negative.
But selling accelerated, heading into the close. The VIX shot up 6.5 percent to end Friday's session at 18.41. For January, the VIX jumped 34 percent, its biggest monthly gain since May 2012. The fear index hasn't traded above 19 since October.
"Given the concerns over the emerging markets and currencies, I think most traders are tending to close down their books so that they don't come in on Monday morning with a negative surprise," said Quincy Krosby, market strategist for Prudential Financial, which is based in Newark, New Jersey.
Global equity markets have been rattled by the outlook for emerging markets, including slower growth in China, while the Federal Reserve's decision this week to keep withdrawing its monetary stimulus added to worries.
The Dow Jones industrial average fell 149.76 points or 0.94 percent, to end at 15,698.85. The S&P 500 lost 11.60 points or 0.65 percent, to finish at 1,782.59. The Nasdaq Composite dropped 19.25 points or 0.47 percent, to close at 4,103.88.
For January, the Nasdaq ended down 1.7 percent,