The Dow Jones slumps over 1,000 points as fears about the U.S. economy intensify

Stocks fell sharply Monday as worries about the U.S. economy sparked a world-wide sell-off.

Market jitters that began with last week's weaker-than-expected jobs report spread to Europe and Asia, as investors worry that the world's largest economy — long a pillar of global growth — is beginning to show some cracks.

The Dow Jones Industrial Average tumbled more than 1000 points on Monday or 2.6%, while the broader S&P 500 index fell 3%. Japan's Nikkei average suffered its worst day since 1987, falling more than 12%.

A measure of market fear more than doubled, after a rise in the U.S. unemployment rate triggered worries that the country could be headed for recession.

Technology shares routed

Technology stocks, which had been at the forefront of a recent boom in markets are being pummeled. Long-term investor Warren Buffett revealed that Berkshire Hathaway had cut its stake in Apple by half during the second quarter, sending shares in the company down over 5%.

Some analysts wonder if the sell-off is an overreaction. While last week's jobs report was weaker than expected, U.S. employers continue to add jobs. The unemployment rate rose to 4.3% not because of widespread layoffs but because more than 400,000 new workers joined the labor force last month.

A survey of services sector managers released Monday offered some reassurance that the U.S. economy is not on the verge of contraction. The survey, from the Institute for Supply Management, showed that unlike the manufacturing sector, which is stuck in a slump, the larger services side of the economy continued to grow in July with new orders, production and employment all expanding.

"The latest ISM services report will ease fears of a sharp economic slowdown," Oren Klachkin, financial market economist at Nationwide, wrote in a research note. "Expanding services activity remains the bulwark of what is still a growing economy."

Still, investors are nervous that the economy may finally buckle under the weight of high interest rates.

The Federal Reserve voted last week to keep rates at their highest level in more than two decades, where they've been for the past year. The central bank signaled a rate cut is possible at its next meeting in September, but pessimists worry that may be too late to stop the slide.