The close: S&P 500 in biggest dip since early November

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Stocks were hit hard on Monday, leaving the U.S. benchmark index with its third loss in the past four trading sessions – sending it to a one-month low just days after it hit a five-year high.

The S&P 500 closed at 1487.85, down 27.75 points or 1.8 per cent, marking its biggest tumble since early November. It has now fallen a combined 2.8 per cent from its multi-year high last week.

The blue-chip Dow Jones industrial average closed at 13,784.17, down 216.40 points or 1.6 per cent. In Canada, the S&P/TSX composite index closed at 12,650.87, down 50.76 points or 0.4 per cent – surrendering some 180 points from its earlier high.

The CBOE Volatility index, widely regarded as a so-called fear gauge, spiked 34 per cent, to 18.99 – its highest level of the year and its biggest one-day move since August 2011.

Markets had looked relatively tame throughout most of the day, and it wasn't entirely clear what caused the selloff in the afternoon. The potential for U.S. budget cuts are no doubt weighing on sentiment, as was Italian election results. There, partial results point to a divided parliament and uncertainty about the country's austerity measures.

Meanwhile, the fact that the S&P 500 had been exploring five-year highs amid a winning streak that had sent the index higher for seven consecutive weeks likely encouraged some investors to take some money off the table. Even some bullish strategists had remarked recently that a stock market pullback was all but inevitable.

The declines were broad, affecting 92 per cent of the stocks within the S&P 500. Among some of the bigger moves, financials fell 2.7 per cent, energy stocks fell 2.5 per cent, materials fell 2.2 per cent and industrials fell 2.1 per cent.

In Canada, energy stocks fell 0.9 per cent and financials fell 0.8 per cent. However, a rally by gold producers limited the downside: Barrick Gold Corp. rose 2.2 after gold bounced to $1,586.60 (U.S.) an ounce, up $13.80.