S&P 500 sinks 3.9%, ending in 'bear market' on inflation worries

NEW YORK,: Wall Street stocks officially entered a "bear market" Monday following another drubbing as markets bet on more aggressive Federal Reserve tightening to address inflation.

The S&P 500, the broad-based equity index, plummeted 3.9 percent to 3,749.82, representing a more than 20 percent drop from its peak -- the definition of a bear market.

The Dow Jones Industrial Average lost 2.8 percent to end at 30,516.74, while the tech-rich Nasdaq Composite Index fell 4.7 percent to 10,809.23.

It was Wall Street's fourth straight day of losses and comes ahead of Wednesday's Fed decision.

More market watchers believe the US central bank will need to ratchet up its monetary tightening in light of Friday's consumer price index report.

US stocks sink again, as S&P 500 enters ‘bear market’

CPI jumped 8.6 percent compared to May 2021, hitting a fresh 40-year high, topping expectations and dashing hopes that price pressures had peaked.

The Fed has signaled plans for a second large 0.5 percentage-point interest rate hike on Wednesday.

But more voices are projecting a three-quarter point increase. Barclays said the more aggressive move was called for "to reinforce credibility and get ahead of inflationary pressures."

The Fed's increasingly aggressive posture "is causing indigestion for the markets," said Angelo Kourkafas, investment strategist at of Edward Jones.

The concerns sent the yield on the 10-year US Treasury note, a proxy for interest rates, above 3.3 percent, the highest level in more than 11 years.

Beyond the concerns about US inflation, analysts also pointed to worries about the continued drag of Covid-19 on the Chinese economy and the global supply chain.

Beijing started a new round of mass testing in its most populous downtown district after a rapidly spreading outbreak linked to a bar saw Covid rules tightened again in the capital.

All 11 sectors of the S&P 500 finished with losses of more than two percent. Among large companies, Apple fell 3.8 percent, Disney lost 3.7 percent and Boeing slumped 8.9 percent.