Stocks fell sharply on Wall Street Monday, knocking nearly 400 points off the Dow Jones Industrial Average.

The benchmark S&P 500 had its worst day in a week as the sell-off put the market deeper into the red for August. The selling was widespread, with technology companies and banks accounting for a big share of the decline.

Investors sought safety in U.S. government bonds, sending their yields tumbling. The price for gold, another traditional safe-haven asset, closed higher.

The costly trade war between the U.S. and China has rattled markets this month. An escalation in tensions between the...