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

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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.

Read: Bitcoin tumbles through $24,000 in crypto crash. This chart shows how much worse a selloff could get.

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.

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