The White House is “concerned” about the fall on US stock markets after the Dow Jones Industrial Average dropped by 1,175 points.

The leading US stock market index closed down 4.6% at 24,345.75.

The White House said: “We’re always concerned when the market loses any value but we’re also confident in the economy’s fundamentals.”

The fall surpasses a previous record 777.68 points drop on the Dow Jones during the financial crisis in 2008.

That came after Congress rebuffed a $700bn bank bailout plan following the collapse of investment bank Lehman Brothers.

It is the largest fall in percentage terms since August 2011, when markets dropped in the aftermath of “Black Monday” when Standard & Poor’s downgraded its credit rating of the US.

US investors are reacting to small but significant changes in the outlook for the American economy, and what that might mean for the cost of borrowing.

The stock market sell-off accelerated on Friday when the US Labour Department released employment numbers which showed stronger growth in wages than was anticipated.

If salaries rise, the expectation is that people will spend more and push inflation higher.

To keep that under control, America’s central bank will need to raise interest rates, which is what has spooked investors who were expecting the US Federal Reserve to increase rates only two or three times this year.

They now predict there may be a few more interest rate rises on the horizon.

Monday’s sell-off was driven by firms moving to sell stocks to put more money into assets such as bonds which benefit from higher rates, says Erin Gibbs, portfolio manager for S&P Global Market Intelligence.

“This isn’t a collapse of the economy. This isn’t a concern that markets aren’t going to do well, or that corporate America isn’t going to do well,” she said.

“This is concern that the economy is actually doing much better than expected and so we need to re-evaluate.”

The fall in share prices came as Jerome Powell was sworn in as the new chair of the Federal Reserve and it underscores the challenge he faces – to make decisions that sustain the growth of the economy without alarming investors.

President Donald Trump has tweeted a number of times about the increase in US stock markets since he was elected in November 2016.

On 7 January, he wrote: “The Stock Market has been creating tremendous benefits for our country in the form of not only Record Setting Stock Prices, but present and future Jobs, Jobs, Jobs. Seven TRILLION dollars of value created since our big election win!”

Boasting about stock market gains is a dangerous game that most presidents avoid playing. Barack Obama did it occasionally, but only after the US economy had climbed significantly from the wreckage of the 2008 collapse.

After warning of a market bubble during the campaign, however, Donald Trump became the Dow Jones’s biggest cheerleader- in tweets, at rallies and even during last week’s State of the Union address. That set up the jarring visual of the president boasting about the benefits of his tax cuts in a speech as the markets headed south.

US cable news channels, which had been airing the president live, cut into their coverage to report on the record-setting day. It was a highly visible hiccup in the recent US economic success story that will be hard for most Americans to miss.

The president will make the case that the fundamentals in the economy are still strong. Wages are up and unemployment is down – possibly contributing to stock drop. If growth continues, this could be chalked up as yet another rhetorical mis-step by a non-politician.

If it’s the beginning of a larger correction in an election year, however, the president’s words could come back to haunt him.