It was a particularly grim day in Wall Street on Monday as fears about inflation intensify.
The S&P 500 slumped nearly 4%, entering a bear market territory, meaning the broad benchmark index has now dropped more than 20% from its most recent high. The S&P 500 had briefly entered a bear market last month but was able to pull back, a feat it was unable to accomplish this time around.
The other indexes also slumped, with the Dow Jones Industrial Average down 2.8%, or nearly 900 points, while the Nasdaq fell nearly 4.7%.
The falls were triggered by a stronger-than-expected inflation report on Friday, which is raising concerns the Federal Reserve will need to raise interest rates even more aggressively this year.
The Fed kicks off its two-day meeting on Tuesday and it had already been expected to raise interest rates by half a percentage point for a second month in a row.
The latest inflation report, which showed consumer prices rising at their annual fastest pace in over 40 years, now raises the likelihood of an even bigger rate hike this week as well as in coming months.
Those actions may help curb price gains but markets are fearful the strong response from the central bank will also push the economy into a recession.
"U.S. equity markets are reacting negatively to last week's hotter-than-expected reading for inflation," says Sam Stovall, chief investment strategist at CFRA.
"Investors are now increasingly concerned that the Fed is too far behind the curve to slow the rise in inflation without throwing the economy into recession," Stovall adds, referring to when a central bank is moving late in addressing price gains.
The market's miserable run
Stocks have had a miserable year because of inflation fears. The Nasdaq, which has a higher concentration of technology shares, has been in a bear market for months.
A bear market is considered an important barometer of investor pessimism and is symbolic of a deep and sustained market selloff.
The S&P 500 entering one sends a powerful warning signal across the economy.
The index that tracks the 500 stocks of mostly the largest U.S. companies. It is a barometer of the health of corporate America and is considered one of leading indicators of the U.S. economy.
Trillions of dollars, including from retirement portfolios, are invested in index funds that make up the stocks of the S&P 500. When the value of the index falls, it leaves less for retirement income, one of the largest causes of worry for retirees.
Cryptocurrencies get hit, CEOs get spooked
Stocks are not the only market getting hammered. Cryptocurrencies are also down sharply, with Bitcoin down 50% from the start of the year, while bond markets are also slumping because of fears about inflation.
That effectively leaves investors with a few places to turn.
Aside from inflation, a range of uncertainty has clouded the outlook for Wall Street. The ongoing war in Ukraine has led to higher commodity prices worldwide, and energy prices have continued to climb.
For the first time, the national average for a gallon of regular gasoline is now more than $5.00, according to AAA.
In recent weeks, a growing number of executives have sounded warnings about the future of the U.S. economy. JPMorgan Chase CEO Jamie Dimon told an audience of investors he sees an economic "hurricane" coming, and Elon Musk, the CEO of Tesla, announced plans to cut the number of salaried workers at the carmaker by 10%.
In an email to staff, Musk reportedly said he had a "super bad feeling" about the economy.
