A broad sell-off in U.S. stocks accelerated on Monday, leaving investors with few places to take shelter from the market tumult.
The S&P 500 fell 2.4%, adding to losses after closing its longest streak of weekly declines since 2011. The Nasdaq Composite fell 3.3% and the Dow Jones Industrial Average lost 511 points, or 1 .6%, to 32,387.
Markets have been rocked this year by a wave of investor concerns. Inflation is at its fastest pace in decades. This has forced the Federal Reserve to launch what economists predict will be its most aggressive monetary tightening campaign since the 1980s. Investors wonder if the Fed will be able to implement its planned program of rate hikes. interest and balance sheet reductions without tipping the economy into recession.
This financial tightening has reinforced fears of a slowdown in global growth. China’s implementation of shutdowns and other measures to contain the spread of Covid-19 and Russia’s war on Ukraine have heightened concerns about supply chain disruptions and reduced spending of consumption.
“The US stock market is quite expensive, especially tech stocks. The market does not know how far the Fed should go to control inflation and we have the feeling of a global slowdown,” said Sebastien Galy, macro strategist at Nordea Asset Management. “There are a lot of negatives happening in the market.”
The selloff hit most sectors of the S&P 500 on Monday, dragging down everything from manufacturing stocks to banking stocks to energy producers, a relative bright spot this year.
Facebook’s parent platforms fell 2.9%, while Amazon.com lost 3.2% and Apple lost 2.9%. Tech stocks have been particularly hard hit by the sell-off this year, as rising rates have made some investors reluctant to invest in parts of the market that look expensive.
Industrials were also hit. Many investors fear that rising inflation, tighter monetary policy and continued global supply chain disruptions will weigh on economically sensitive sectors.
Caterpillar fell 3.1%, while Boeing lost 7.3%.
Even parts of the market that had held up relatively well retreated on Monday.
The S&P 500 energy sector fell 6.3%, on its way to its biggest one-day decline this year.
Energy stocks have soared in recent months alongside oil prices. But lately, some traders have begun to worry that lockdowns to contain the spread of Covid-19 in China could undermine global demand for the commodity. It took some steam off the rally. U.S. crude oil fell 4.6% to $104.75 a barrel.
“The market volatility shows that there is great uncertainty about the direction people think we are headed,” said Peter Andersen, founder of Boston-based investment firm Andersen Capital Management.
The prospect of further interest rate hikes to fight inflation has some investors worried about slowing economic growth.
These fears have led some fund managers to hold the dollar, considered a safer investment in times of volatility, due to its status as the world’s reserve currency. The WSJ Dollar Index, which measures the US currency against a basket of 16 others, edged up 0.4% on Monday.
Overseas, the pan-continental Stoxx Europe 600 index fell 2.5%, led by declines in the travel and leisure and technology sectors.
In Asia, Japan’s Nikkei 225 fell 2.5% on Monday, while Australia’s S&P/ASX 200 fell 1.2%.
China’s CSI 300 index, which tracks the largest companies listed in Shanghai or Shenzhen, fell 0.8%. Hong Kong markets were closed for a public holiday.
Meanwhile, selling pressure on US government bonds eased.
The yield on the benchmark 10-year Treasury note was 3.079% on Monday, down from 3.124% on Friday. The 10-year yield had risen 1.6 percentage points from the end of 2021 through Friday, leading some investors to reassess valuations of technology and growth stocks. Bond yields rise when prices fall.
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