U.S. equities saw steep market sell-off on Monday, with all three major indexes plunging more than 3 percent amid investors' rising risk aversion.

The Dow Jones Industrial Average fell 1,031.61 points, or 3.56 percent, to 27,960.80. The S&P 500 was down 111.86 points, or 3.35 percent, to 3,225.89. The Nasdaq Composite Index was down 355.31 points, or 3.71 percent, to 9,221.28.

It was the biggest drop for Dow since February 2018. The index also gave up its gain and is now down 2 percent for the year.

All of the 30 Dow component companies closed in red territory, with UnitedHealth Group and American Express erasing 7.84 percent and 4.97 percent, respectively, the top two laggards.

Trade bellwether Boeing and Caterpillar traded 3.78 percent lower and 3.67 percent lower, respectively.

Most airline stocks traded sharply lower, with American Airlines and Delta Air Lines erasing 8.52 percent and 6.29 percent, respectively.

All of the primary S&P 500 sectors traded lower. Energy and technology declined 4.74 percent and 4.19 percent, respectively, leading the laggards.

Investors are becoming increasingly concerned over a rapid spread of the COVID-19 outside of China, with a spike in the number of confirmed cases particularly evident in South Korea and Italy, market analysts at Wells Fargo Advisors said in a note on Monday.

"Anxiety over the coronavirus outbreak dented risk sentiment," the analysts said.

Mark Haefele, UBS Global Wealth Management's Chief Investment Officer, said in a note that if Europe or North American nations were to impose aggressive containment measures, it could mean materially lower economic growth in the first half of the year, and require offsetting actions from monetary and fiscal authorities to prevent a prolonged downturn.

Analysts from MRB Partners said they do not expect the global economy to stumble into recession, but cautioned investors to "be prepared for a volatile, and periodically difficult, next few months."

The Cboe Volatility Index, widely considered the best fear gauge in the stock market, jumped 47.48 percent to 25.19.

Investors flocked into safe-haven assets such as treasury notes and gold. The 10-year Treasury note yield declined to 1.37 percent, a multi-year low. Yields move inversely to prices.

Gold futures soared, with the most active gold contract for April delivery rose 27.8 U.S. dollars, or 1.69 percent, to settle at 1,676.6 dollars per ounce.