The increased prospect that six years of near-zero borrowing costs in the U.S. may end next month rippled through global markets, as companies hurt most by the strengthening dollar led a selloff in American equities and bonds fell with emerging-market assets.

The Standard & Poor's 500 Index sank the most in a month, with large caps from Caterpillar Inc. to Nike Inc. pacing the drop. European stocks lost 1.1 percent. The dollar traded near the highest in a decade, as a gauge of emerging-market currencies slumped toward a five-week low. Treasury 10-year note rates climbed to 2.34 percent.

Global investors continue to adjust to the increased likelihood that America's benchmark rate will rise this year, a move that would end an unprecedented era of record-low borrowing costs. Concern that capital outflows from developing nations will worsen sent emerging assets lower, while dollar-denominated resources slumped with shares of American multinational companies. Treasuries pared losses with gold on haven demand.

Investors shrugged off the threat of higher rates on Friday, focusing instead on a blowout jobs report that signaled the U.S. economy may be ready to withstand tighter monetary policy. That sentiment reversed Monday in the absence of any additional data and after American equities ended last week near the highest level in three months.

"People sort-of stewed on it over the weekend that we're facing a rate hike in December," said Robert Pavlik, who helps oversee $9.1 billion as chief market strategist at Boston Private Wealth. "I don't think it's the 25 basis points that's necessarily leading the market down, but what comes after. How fast and furious do the rate hikes come now that this cheap money environment is coming to an end?"

The S&P 500 fell 1.2 percent at 2:54 p.m. in New York, the most since Oct. 2. The gauge is coming off its longest run of weekly gains this year, a streak that pushed it within 1.5 percent below its May record.

Consumer-discretionary stocks had the biggest declines among 10 groups in the S&P 500, falling 1.9 percent. Macy's Inc. and Kohl's Corp. declined more than 5.5 percent after Citigroup Inc. cut its earnings estimates for the companies, saying the industry is suffering from a sales slowdown and inventory glut.

There is an "absence of any real, compelling reason to step in and buy a lot right now," Peter Tuz, who helps manage $400 million as president of Chase Investment Counsel Corp. in Charlottesville, Virginia. "I don't think anyone came into work today figuring that they had to load up on stocks."

European stocks fell, after rising four times in the past five days, as investors weighed the outlook for global economic growth and stimulus. The Stoxx Europe 600 Index lost 1.1 percent. Shares of exporters fell after worse-than-forecast Chinese trade data.