Stocks sell-off intensified Monday, notching a four-day losing streak with the S&P 500 tumbling into bear market territory as soaring inflation slammed market sentiment over fears recession is looming ahead of this week’s Federal Reserve key FOMC meeting.
The S&P 500 fell 151 points or 3.9% to end at 3,749.63 points, marking its lowest level since March 4, 2021. The benchmark index entered bear market territory when markets opened Monday morning and officially closed confirming when S&P 500 losses were nearly 22% below its all-time record close reached on January 3. A bear market territory is defined as a 20 percent fall from the most recent high. The S&P 500 to a fresh new 52-week low and closed below the 3,837 level.
The Dow Jones plunged 876.05 points, or 2.8% to close at 30,516.74, bringing its losses about 17% off its record high. The Nasdaq Composite index, which suffered its fourth straight drop, confirmed it was in bear market territory on March 7 and has declined 33% since its all-time high set in November 2021. The last time stocks were in a bear market was during the onset of the Coronavirus pandemic in March 2020.
Three weeks ago, the S&P 500 narrowly flirted with a bear market on an intraday basis, but narrowly escaped as the stocks rebounded before the close.
On Friday, the May hotter-than-expected CPI report showed inflation in the United States was accelerating and entrenched in every corner of the economy. The data, which reported an unexpected pick-up in inflation to a fresh 40-year high of 8.6% sent markets panicking about the Fed now being forced to move more aggressively than previously telegraphed path without tipping the economy into a recession.
A super-sized rate hike from the Feds would add more pressure to already-volatile stocks by further raising the cost of borrowing for businesses, but the Central Bank’s failure to act earlier has left inflation to run at the current four decades-high rates. With the Fed behind the inflation fight, its campaign fight has put enormous strain on the stock market, with concerns that the U.S. economy will slip into a recession as a result.
The Federal Reserve is slated to meet Tuesday and Wednesday, and it is expected to raise interest rates as it strives to tamp down inflation. Many analysts had predicted that the central bank would raise rates by half a percentage point.
As of Monday, Fed funds futures priced in an about 25% probability of a three-quarter point hike this week and an around 75% probability of a 50 basis point hike, according to CME Group data. Fed funds futures, track traders’ predictions for where the Fed’s target interest rate band will land.
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