U.S. stocks plunged on Monday, marking a second day of trading that generated steep declines, amid fears of rising inflation and potential rate increases by the Federal Reserve. 

The two-day losing streak was sparked by a pickup in wages, which could usher in higher inflation. Average hourly earnings, which had been rising at a modest 2.5 percent in the recovery, increased by 2.9 percent from the year before, the Labor Department said on Friday. Some sectors also showed weakness, including banks following the punitive action by the Federal Reserve against Wells Fargo (WFC).

The two-day slump has wiped out the stock market's gains so far this year. Investors are concerned that the recent period of low inflation and low interest rates may be coming to an end. Higher borrowing costs could eat into corporate profits, while also slowing down the market for houses, cars and other items bought using credit.

Prior to Monday, the biggest one-day drop in the Dow was on September 29, 2008, when the index plunged 777.68 points, or about 7 percent. 

As of late Monday afternoon, the Dow Jones Industrial Average was down almost 3 percent. The index declined more than 1,500 points before recovering slightly, down 747.32 points to 24,773.64. 

Wells Fargo dropped 8 percent Monday after the Fed hit the bank with new penalties over a scandal that involved opening millions of phony consumer accounts.

Energy companies were also moving lower as the price of crude oil slipped. Exxon Mobil (XOM) fell 3.5 percent. 

Other indices also declined. The Nasdaq composite lost 162.02 points, or 2.2 percent, to 7,078.93. The Standard & Poor's 500 index fell 74.29 points, or 2.7 percent, to 2,687.84, with the energy sector leading losses that included nine of 10 major industry groups.

The market is coming off its worst week in two years. Stocks fell sharply on Friday as traders worried about inflation and rising interest rates.

The slide was fueled by the release of January's jobs report on Friday that showed wages growing at their healthiest pace in years, with investors now expecting inflation to pick up, leading to higher interest rates and corporate borrowing costs.

"If there is one thing stocks hate is a rising rate environment," wrote Paul Nolte, a senior vice president and portfolio manager at Kingsview Asset Management. "The markets will be having a rough couple of weeks at it assimilates the 'new' normal," he added of expectations the Fed would not be hiking rates faster than the previously expected three times.