Another broad stock market sell-off on Monday magnified Wall Street’s losses from last week, sending the S&P 500 into its biggest drop since mid-June.
The benchmark index fell 2.1%, nearly doubling its loss from last week when it broke a four-week winning streak. The Dow Jones Industrial Average fell 1.9% and the Nasdaq fell 2.5%.
Technology companies and retailers had some of the heaviest losses. Shares of smaller companies also lost ground, pushing the Russell 2000 index down 2.1%.
The latest market decline comes as investors grapple with uncertainty about when the highest inflation rate in decades will decline significantly, how much the Federal Reserve will need to raise interest rates to keep it under control, and how much rate hikes will slow the economy.
Wall Street will look for insight into these unknowns later this week, when the Federal Reserve holds its annual meeting in Jackson Hole, Wyoming.
“Volatility has increased as investors become increasingly nervous about what they might hear from officials at the Fed’s upcoming Jackson Hole symposium,” said Jeffrey Roach, chief economist at LPL Financial.
The S&P 500 fell 90.49 points to 4,137.99. The Dow lost 643.13 points to close at 33,063.61 while the Nasdaq fell 323.64 points to 12,381.57. The Russell 2000 lost 41.60 points to 1,915.74 points.
About 95% of the stocks in the S&P 500 fell. Stocks of technology companies, retailers, banks and communications services accounted for a large part of the index decline. Microsoft was down 2.9% and Target 3%. JPMorgan was down 1.7% and Netflix 6.1%.
Movie theater operators also fell into choppy trade after news that Cineworld is considering filing for Chapter 11 bankruptcy protection. The industry is still struggling to recover from the virus pandemic. AMC Entertainment was down 5.5% and Cinemark 5.8%.
Bright spots in the market included Signify Health, which rose 32.1% after The Wall Street Journal reported that Amazon would bid on the company.
Bond yields gained ground. The yield on the 10-year Treasury, which affects interest rates on home mortgages and other loans, rose to 3.03% from 2.97% at the end of Friday.
The broader market’s losses follow a weeklong rally. Investors are trying to figure out where the economy is headed as persistently high inflation hurts businesses and consumers. Record high inflation is also making investors focus on central banks and their efforts to fight high prices without further hurting economic growth.
“You’ve had quite the rally and there is reason to be unsure where we are going,” said Tom Martin, senior portfolio manager at Globalt Investments. “There’s still quite a bit of potential for a recession.”
Minutes from last week’s Federal Reserve board meeting in July confirmed the plans for more rate hikes despite signs of weaker economic activity. Traders fear that aggressive moves to slow the economy will go too far and trigger a recession. The U.S. economy has already shrunk in the first half of 2022, and Wall Street will get more information on Thursday when the government releases an updated report on the U.S. economy for the second quarter.
Investors are also looking forward to this week’s Federal Reserve conference for signs of more potential rate hikes in the US to cool rising inflation. Fed Chair Jerome Powell will deliver a speech Friday morning at the central bank’s annual meeting in Jackson Hole, which begins Thursday.
The Fed is meeting after a tough week of corporate and economic data showing that inflation is still putting pressure on the economy, but consumer spending remains resilient. Falling gasoline and food prices for wheat and corn have helped ease some of that pressure. That essentially helped to halt the inflation rally in July, although prices still remain stubbornly high.
“I don’t think we’re out of the loop with inflation yet,” Martin said. “We still don’t really know how inflation will play out and what the Fed will do.”