Draw rectangle not allowing drag to draw, only opens "create rectangle" dialogue box

When I select the rectangle (or any shape) tool, it will not allow me to drag from the corner to create the shape.  Instead, when I click it creates a small shape and opens a dialog box allowing you to input your desired dimensions. 

Even worse, I cannot use transform to change the size after its created.  So the only way to alter the size is inputting the size, in pixels, in the dialog box.  Losing my mind over here, please help!