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S&P 500 ends in bear market, Dow drops nearly 900 points as recession fears rise ahead of Wednesday’s Fed decision

US stocks closed sharply lower on Monday, with the S&P 500 entering a bear market and Dow Jones Industrials falling nearly 900 points, as financial markets continued to recover from a surprise surge in inflation. days before a Federal Reserve decision on interest rates.

What happened
  • The Dow Jones Industrial Average DJIA,
    -2.79%
    ended down 876.05 points, or 2.8%, at 30,516.74, after losing as much as 1,019.07 points at its session low.

  • The S&P 500 SPX,
    -3.88%
    ended down 151.23 points, or 3.9%, at 3,749.63. The S&P 500’s close below 3,837.25 marks a decline of more than 20% from the index’s all-time high close on Jan. 3, confirming a bear market for the large-cap benchmark.

  • The Nasdaq Composite COMP,
    -4.68%
    fell 530.80 points, or 4.7%, to 10,809.23.

What drove the markets

Stocks sold off sharply on Monday on rising volatility as searing inflation data rattled markets ahead of the Federal Reserve’s midweek policy decision. Friday’s data that showed the consumer price index hit a new 40-year high of 8.6% year-on-year has investors reassessing how far the Fed will go in raising interest rates. interest.

“Friday’s inflation data was a clear game-changer and the market is reacting accordingly,” said Daniel Tenengauzer, head of strategy and market intelligence for BNY Mellon. “Bond yields are higher and therefore equities are down as the Fed will have to react.”

Market supplement: BlackRock not buying dip as volatility spikes in stock market sinking

Like economists at Barclays and Jefferies, Tenengauzer said in a phone interview that he expects policymakers to raise the federal funds rate by 75 basis points on Wednesday. “Inflation is clearly no longer anchored and officials need to build a new narrative,” given their median forecast in March for the long-term fed funds rate to be at 2.4% and the end-of-term level. year 2022 is 1.9%, he said. . The Fed’s main policy rate target is currently between 0.75% and 1%.

“There’s certainly a feeling in the market that the Fed’s credibility is also being undocked as we speak,” Tenengauzer said by phone.

The dollar also jumped, with the ICE US dollar index DXY,
-0.03%,
which measures the currency against a basket of six major rivals, jumping 1% to trade near a nearly 20-year high.

Worries over monetary policy tightening aren’t confined to the United States Last week, the European Central Bank suggested it could follow a quarter-point rate hike in July with a 50-point move in September, as the Bank of England also prepares for another rate hike expected this week.

The fallout has been brutal in cryptocurrencies, with bitcoin BTCUSD,
-3.90%
extending its weekend plunge to trade below $23,200. Crypto lending platform Celsius Network has suspended withdrawals and transfers. And the world’s largest cryptocurrency exchange, Binance, instituted a pause on bitcoin withdrawals on Monday morning, founder and CEO Changpeng Zao announced on Twitter.

Lily: Bitcoin tumbles from $24,000 in crypto crash. This graph shows how much worse a sell could be.

Also see: Dow plunges to record 3-day streak of 500 point declines

Companies in the spotlight
  • Shares of Coinbase Global Inc.
    PIECE OF MONEY,
    -11.41%
    ended down 11.4%, feeling a downdraft amid general cryptocurrency weakness.

  • Espace Astra Inc.
    ASTR,
    -23.76%
    shares fell 23.8% after the orbital launch services company revealed it failed to deliver a post-launch payload.

other assets
  • GCQ22 August Gold Futures,
    -0.48%
    fell $43.70, or 2.3%, to settle at $1,831.80 an ounce, the lowest most active contract finish since May 18, according to FactSet data.

  • The Stoxx Europe 600SXXP,
    -2.41%
    ended down 2.4%, while London’s FTSE 100 UKX,
    -1.53%
    lose 1.5%.

  • The Shanghai Composite SHCOMP,
    -0.89%
    ended down 0.9%, while the Hang Seng HSI index,
    -3.39%
    fell 3.4% in Hong Kong and Japan Nikkei 225 NIK,
    -1.77%
    decreased by 3%.

Joy Wiltermuth and Steve Goldstein contributed to this article.

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Post expires at 12:44am on Friday June 24th, 2022