Stocks fell Monday on fears that the Federal Reserve may continue tightening until it tips the economy into a recession.
The Dow Jones Industrial Average fell 482.78 points, or 1.4%, to finish at 33,947.10. The S&P 500 slumped 1.79% to settle at 3,998.84. The Nasdaq Composite slid 1.93% to end the session at 11,239.94.
Tesla shares shed about 6.4% on reports of an output cut at its Shanghai factory, while tech stocks like Amazon and Netflix slid 3.3% and 2.4%, respectively, on growth concerns. Salesforce tumbled nearly 7.4% as it announced the departure of Slack’s CEO.
Macao-linked casino stocks gained on hopes of easing Covid-19 restrictions, while VF Corp. shares slid 11.2% after the apparel company cut its outlook.
A hotter-than-expected reading of November ISM Services further fueled concerns that the Fed will continue hiking after the index topped Dow Jones’ estimates and increased from October.
Bond yields pushed higher as equities fell, with the yield on the benchmark 10-year Treasury last trading up nearly 9 basis points at 3.588% late Monday.
“Clearly, equity markets want to move higher, but that’s very dependent on inflation getting under control,” said Peter Essele, senior vice president of investment management and research at Commonwealth Financial Network. “And so, when you have above expectation prints on any econ number that comes out, that tends to fuel inflationary concerns, which sends rates higher.”
Following a speech last week by Fed Chairman Jerome Powell, markets largely expect the central bank will approve a 0.5 percentage point interest rate increase. That would mark a step down from a series of four straight 0.75 percentage point hikes.
At the same time, Powell also said the “terminal rate,” or point at which the Fed stops raising, likely “will need to be somewhat higher” than indicated at the September meeting. That could mean a fed funds rate that ends up in excess of 5%, from its current target range of 3.75%-4%.
The major averages are coming off a second consecutive positive week.
