Dow Drops Sending S&P 500 Into Bear Market
As inflation fears intensified, Wall Street experienced a particularly grim day.
As a result, the broad benchmark index slumped nearly 4%, entering bear market territory, meaning it is now down more than 20% from its most recent high.
After briefly entering a bear market last month, the S&P 500 was able to pull back.
In addition to the Dow Jones, other indexes both declined, with the Nasdaq down nearly 4.7% and the Dow down 2.8%.
An inflation report on Friday showed higher inflation than expected, raising concerns the Federal Reserve may have to raise rates even more aggressively this year.
On Tuesday, the Federal Reserve will begin its two-day meeting, and one half percentage point interest rate hike is expected for the second consecutive month.
Inflation rose at its fastest rate in over 40 years in the latest inflation report, raising the likelihood of even greater rate hikes this week and in the months ahead.
The central bank’s actions may curb price gains, but markets fear a recession will also follow.
Sam Stovall, the chief investment strategist at CFRA, says the markets reacted negatively to last week’s hotter-than-expected inflation reading.
Investors are growing increasingly concerned that the Fed is too late in addressing price increases without causing an economic recession, Stovall says.