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Stocks tanked on Monday , continuing losses from the past several trading sessions as fears about a weakening economy gripped markets.

The Nasdaq Composite ( ^IXIC ) dropped about 3.4%, while the S&P 500 fell 3% and the Dow Jones Industrial Average ( ^DJI ) shed about 2.6%, or more than 1,000 points in afternoon trading.

The 10-year Treasury yield ( ^TNX ) was hovering near 3.78%, down roughly 50 basis points in less than two weeks. Volatility has spiked, too, The CBOE Volatility Index, known by its ticker as simply the VIX ( ^VIX ), shot up above 60 for the first time since 2020.

The latest leg of the sell-off accelerated overnight as Japan's Nikkei 225 ( ^N225 ) dropped more than 12% in its biggest-ever daily loss after a surprise interest rate hike from the Bank of Japan. Yardeni Research president Ed Yardeni told Yahoo Finance he thinks the "large extent" of the sell-off in US stocks is attributable to the moves in Japan.

Yardeni explained that an unwinding of the so-called carry trade spawned from speculators borrowing in Japan at 0% interest rates and then taking that money and investing in areas of the market like the Magnificent Seven tech stocks.

"Now, with the central bank tightening while other central banks are easing, the yen suddenly had a big move to the upside and that strength really led to a lot of margin calls of these speculative positions," Yardeni said. "That's all coming unglued. And I think it's a lot of margin calls, and I think it's going to happen pretty quick, and the unwind should be over by the end of the week."

The sell-off in US stocks also came as investors also adjusted their expectations for domestic monetary policy.

A weaker-than-expected July jobs report, which revealed a widely accurate recession indicator tied to a rise in the unemployment rate had been triggered , exacerbated fears that Fed policy may be too restrictive.

Subsequently, markets have quickly shifted to price in higher chances of more rate cuts this year. As of Monday morning, markets are pricing in a roughly 95% chance of a 50-basis-point interest rate cut by the end of the Fed's September meeting, up from a less than 12% chance a week prior, per the CME FedWatch Tool.

Still, some Wall Street strategists don't think the move in markets is a clean bet on a flailing US economy.

"I don't necessarily buy the fact that the market is voting that the economy is just weakening outright overnight," Charles Schwab senior investment strategist Kevin Gordon told Yahoo Finance. "I think it takes a little bit longer for us to get a sense of that."

Gordon notes that since the recent market highs in July, defensive sectors like Consumer Staples and Utilities have led the market, while the largest losses have been seen in Technology.

"The sector action is telling me that it's much more about selling the high flyers and making some profits ... It's not this outright collapse in the cyclical trade."

To Gordon, the recent market reaction to the jobs report was in sync with sentiment shown by investors following Big Tech earnings. In both cases expectations were likely too upbeat compared to the actual data.

"It's a good reminder that this is really all about expectations and not necessarily about good versus bad when it comes to data," Gordon said.

On Monday, Big Tech remained the main culprit of the sell-off, with Nvidia ( NVDA ) sliding more than 6% while Apple ( AAPL ) and Microsoft ( MSFT ) were all off more than 3%.

Citi US equity strategist Drew Pettit agreed with Gordon that the market action is a continuation of a recent trend where investors take profits from the "high flying" tech stocks that led the market rally in 2023 and most of 2024, and move into other areas of the market that are less reliant on growth.

"This is kind of what you get when markets have a really aggressive run with not a lot of volatility," Pettit said. "Everyone kind of gets on very similar trades. Everyone gets pulled up at the same time."

He added, "We're just working from a place where sentiment was really strong, growth expectations were really high, and we're calling that into question right now."

For Pettit, that fundamental story for stocks to end the year higher than their current levels hasn't changed yet, he said.

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer .