Dow Tumbles Nearly 500 Points, Market Volatility Increases Sharply

US stocks closed lower on Monday, as better-than-expected services data raised concerns that the Fed could increase rates for longer.

The ISM services index climbed to 56.5 in November from previous reading of 54.4.

Federal Reserve Chair Jerome Powell, last week, said the bank could slow the pace of interest rate increases, while the Labor Department reported better-than-expected job and wage growth for the month of November.

All the major sectors on the S&P 500 closed on a negative note, with energy and consumer discretionary stocks recording the biggest plunge on Monday.

The Nasdaq 100 dropped 1.73% to close at 11,786.80 on Monday, amid a decline in shares of Tesla, Inc. TSLA and Amazon.com, Inc. AMZN. The S&P 500 dipped 1.79%, while the Dow Jones fell 1.40% to settle at 33,947.10 in the previous session.

The Chicago Board Options Exchange's CBOE Volatility Index (VIX) jumped 8.9% to 20.75 points.

What is CBOE Volatility Index?

The CBOE Volatility Index, popularly known as VIX, is a measure of the equity market's expectation of volatility based on S&P 500 index call and put options.