(CBS NEWS) U.S. stocks took it on the chin for a third session in a row on Monday, after an attempted bounce-back lost steam, leaving the Standard & Poor's 500 Index in a correction.

\"It's clear what started this -- fears about China, falling commodity prices and general weakness in emerging markets. And market psychology takes on a life of its own,\" David Kelly, chief market strategist, J.P. Morgan Funds, told CBS MoneyWatch. \"The key message for investors is, don't freak out. U.S. exports to China are a tiny fraction of our GDP, and to the extent commodity prices are pushed down, that's positive for the U.S. economy.\"

The S&P (SPX) dropped as much as 5.3 percent before scaling back its losses. At the unofficial close, the S&P was down 77 points, 3.9 percent, at 1,893 The Dow (DJI) had tumbled more than 1,000 points right after the open, before recouping more than half of that drop. And then the losses started piling up again. The blue-chip index lost 586 points, or 3.6 percent, on the day to 15,874. The Nasdaq (COMP) cleared a near 9 percent drop, before ending the session off 180 points, or 3.8 percent, at 4,526.

\"This is the volatility that we've all been talking about as we get closer to Fed rate hikes. As we finally get here, it's showing up,\" Jeffrey Kleintop, chief global investment strategist at Charles Schwab. \"This is the first year that the economy is outperforming the financial markets, it's been the other way around for the past five years. The economy is doing OK. Globally, nothing is booming economically.\"

The less pricey stock valuations had some investors buying the dip.

\"The stock market was overvalued with the S&P 500 at 2,120 to 2,130, so it doesn't take much to get the selling going. Mutual funds had very low cash positions going into this, so when investors get scared, they sell their mutual funds, and equity funds have to sell stocks to meet those redemptions,\" said Hugh Johnson, chairman of Hugh Johnson Advisors. \"It almost makes you want to take your hat off and say, 'Thank you small investor for selling mutual funds'.\"

On Friday, the Dow declined into correction mode, down 10 percent from its May high, as investors voiced worries that the U.S. economy is not strong enough to block events overseas, with China's slowdown of particular concern.

The Shanghai Composite Index declined 8.5 percent to 3,210 at the close to clear 2015 gains.

Chinese authorities issued notice to state media to censor negative market reports about the hefty losses, the Hong Kong-based South China Morning Post reported.

Worries about China's slowing economy and reduced demand by the world's second-biggest economy for commodities had pushed the price of crude oil below $40 a barrel.

There's also increased certainty that the Federal Reserve would not hike interest rates in September for the first time since 2006.