A trader watches his screen as he works on the floor of the New York Stock Exchange August 24, 2015. [Photo/Agencies]

Monday's trading volume was almost 14 billion shares, according to Reuters data. This was roughly twice the 7 billion daily average for the month to date, calculated by BATS Global Markets. In comparison, 10.6 billion shares changed hands in Friday's selloff.

Oil prices settled sharply down after plunging to six-and-a-half year lows. Safe-haven US government and German bonds, as well as the yen and the euro, rallied as currency concerns kicked in due to China's recent currency devaluation.

US crude settled down 5.5 percent at $38.24 a barrel after falling as low as $37.75 earlier. Brent settled off 6 percent at $42.69 after falling as low as $42.51, taking both under January's lows for the first time. Worries about weaker demand from normally resource-hungry China added to global supply glut concerns.

The S&P's energy sector was the weakest performer, with a 5.2 percent decline for the day.

Copper, seen as a barometer of global industrial demand, hit a six-year low, and nickel fell sharply.

Great fall of China

The slump in Chinese stocks was their worst performance since the depths of the global financial crisis in 2007 and wiped out what was left of 2015's gains, which in June stood at more than 50 percent.

Many traders had hoped Beijing would take support measures, such as an interest rate cut, over the weekend after China's main stock markets slumped 11 percent last week.

With serious doubts emerging about the likelihood of a US interest rate rise this year, the dollar was down 1.6 percent against other major currencies after falling as much as 2.5 percent earlier in the day.

The Australian dollar fell to more than six-year lows and many emerging market currencies also plunged , while the frantic dash to safety pushed the euro to a seven-and-a-half month high of more than $1.17.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 5.4 percent to a more than three-year low. Tokyo's Nikkei ended down 4.6 percent and Australian and Indonesian shares hit two-year troughs.

London's FTSE 100, with its large number of global miners and oil firms, ended down 4.7 percent for its 10th straight decline - its worst run since 2003.

The MSCI all world stock index was off 3.8 percent at the end of the US session.