By U.S. stocks closed sharply lower on Monday, with the S&P 500 entering a bear market and Dow industrials tumbling almost 900 points, as financial markets continued to reel from a surprise acceleration in inflation just days ahead of a Federal Reserve interest-rate decision.
What happened
The Dow Jones Industrial Average
DJIA,
-2.79%
finished down 876.05 points, or 2.8%, at 30,516.74, after dropping as much as 1,019.07 points at its session low.
The S&P 500
SPX,
-3.88%
ended 151.23 points lower, or 3.9%, at 3,749.63. The S&P 500’s close below 3,837.25 marks a more than 20% pullback from the index’s Jan. 3 record close, confirming a bear market for the large-cap benchmark.
The Nasdaq Composite
COMP,
-4.68%
dropped 530.80 points, or 4.7%, to 10,809.23.
What drove markets
Stocks sold off sharply Monday on climbing volatility, as hot inflation data rattled markets ahead of the Federal Reserve’s mid-week policy decision. Friday’s data that showed the consumer-price index shooting to a fresh 40-year high of 8.6% year-over-year has caused investors to reassess how high the Fed will go in raising interest rates.
“The inflation data on Friday was clearly a game-changer and the market is reacting accordingly,” said Daniel Tenengauzer, head of markets strategy and insights for BNY Mellon. “Bond yields are higher and, as a result, equities are down because the Fed will need to react.”
Market Extra: BlackRock isn’t buying the dip as volatility climbs in sinking stock market
Like economists at Barclays and Jefferies, Tenengauzer said in a phone interview that he expects policy makers to lift the fed funds rate by 75 basis points on Wednesday. “Inflation has clearly come unanchored and officials need to build a new narrative,” given their median forecasts in March for the long-term fed funds rate to be at 2.4% and the 2022 year-end level to be at 1.9%, he said. The Fed’s main policy rate target currently sits between 0.75% and 1%.
“There’s definitely sentiment in the market that the Fed’s credibility is also being de-anchored as we speak,” Tenengauzer said via phone.
The dollar also jumped, with the ICE U.S. dollar index
DXY,
+1.04%,
which measures the currency against a basket of six major rivals, jumping 1% to trade near an almost 20-year high.
Concerns about monetary policy tightening aren’t limited to the U.S. Last week, the European Central Bank suggested it could follow up a quarter-point rate hike in July with a 50-basis point move in September, as the Bank of England also readies another expected rate hike this week.
The fallout has been stark in cryptocurrencies, with bitcoin
BTCUSD,
-14.03%
extending its weekend plunge to trade below $23,200. The crypto lending platform Celsius Network has suspended withdrawals and transfers. And the world’s largest cryptocurrency exchange, Binance, instituted a pause on withdrawals of bitcoin Monday morning, founder and CEO Changpeng Zao announced on Twitter.
Also see: Dow tumbles toward record 3-day streak of 500-point declines
Companies in focus
Shares of Coinbase Global Inc.
COIN,
-11.41%
finished lower by 11.4%, feeling a downdraft amid the broad weakness in cryptocurrencies.
Astra Space Inc.
ASTR,
-23.76%
shares closed down by 23.8% after the orbital launch services company disclosed that it failed to deliver a payload after launch.
Other assets
August gold futures
GCQ22,
-2.88%
fell $43.70, or 2.3%, to settle at $1,831.80 an ounce, the lowest most-active contract finish since May 18, FactSet data show.
The Stoxx Europe 600
SXXP,
-2.41%
ended 2.4% lower, while London’s FTSE 100
UKX,
-1.53%
shed 1.5%.
The Shanghai Composite
SHCOMP,
-0.89%
ended 0.9% lower, while the Hang Seng Index
HSI,
-3.39%
tumbled 3.4% in Hong Kong and Japan’s Nikkei 225
NIK,
-3.01%
dropped 3%.
— Joy Wiltermuth and Steve Goldstein contributed to this article.
