Stocks Tumble as Investors Worry About Consumers (ext: ABCNews/TheStreet)

Stocks in New York pulled back sharply Monday, extending Friday's losses as overbought conditions and waning confidence in the economy spurred a global selloff.

The Dow Jones Industrial Average gave up 186.06 points, or 2%, to 9135.34, while the S&P 500 declined 24.36 points, or 2.4%, to 979.73. The Nasdaq Composite fared worst, losing 54.68 points, or 2.8%, to 1930.84.

An unexpected decline in U.S. consumer sentiment that weighed on stocks on Friday garnered even more concern at the start of the new week as more signs emerged that the economic recovery may be more drawn out than some had hoped.

Consumer sentiment data gave credence to disappointing retail sales data from earlier last week, and the market depends on the consumer, says Doug Roberts, chief investment strategist at ChannelCapitalResearch.com.

A shudder in China's main stock market touched off a wave of selling that spread to Europe and then the U.S. A drop in quarterly profits at home improvement retailer Lowe's Cos. added to worries that an improvement in the economy is far off.

The Shanghai stock market tumbled 5.8 percent Monday as investors worried that stocks had risen too quickly and that the Chinese government would tighten bank lending policies. Investors outside China have been hoping that strengthening there would spill over to other economies.

The slide on Wall Street was steep but felt more controlled than the plunges of the past year because stocks ended just off of their worst levels and because analysts have been calling for a retreat after the Dow and Standard & Poor's 500 index raced up 15 percent in only five weeks.

Some investors used to seeing a quick bounce-back in stocks have underestimated how difficult the recovery could be, even though many analysts have warned that it could take well into 2010 for the economy to regain strength. And some seem to be in the same trading mind-set as three years ago, willing to bid stocks up even when there was little economic or corporate evidence to justify a huge advance.

But it might be even simpler, says Jeff Saut, chief investment strategist at Raymond James, who adds, "no surprise here." Some indications show things were as overbought "as they've been in years," he says.

"The fact of the matter is the rally was long of tooth, stocks were stretched, and you have a bunch of unknowns for the next month or two, so stocks were looking for a reason to pull back," Saut says. But, he warns, "It's time to be cautious, not bearish."