Markets plummet around the world, bear market rumbles on Wall Street | app

NEW YORK (AP) — Wall Street tumbled even further on Monday, sending the S&P 500 down more than 20% from its all-time high, amid fears a recession is more likely given how far inflation has become unshakable.

The S&P 500 was down 2.7% in the first session after investors had the weekend to ponder a stunning report that showed inflation was getting worse, not improving as some had hoped. The Dow Jones Industrial Average was down 625 points, or 2%, at 30,767 as of 9:40 a.m. EST, and the Nasdaq composite was down 3%.

The center of attention on Wall Street was once again the Federal Reserve, which is struggling to control inflation. Its primary means of doing so is by raising interest rates to slow the overall economy, a blunt tool that risks causing a recession if used too aggressively.

Speculation is mounting that the Fed could raise its main short-term interest rate by three-quarters of a percentage point later this week. That’s triple the usual amount and something the Fed hasn’t done since 1994. Traders now see a 42% chance of such a mega hike, up from just 3% a week ago, according to CME Group.

No one thinks the Fed will stop there, with markets bracing for a continued streak of bigger-than-usual increases. That would come on top of some already discouraging signals about the economy and corporate earnings, including a record early reading on consumer sentiment that has been soured by high gasoline prices.

It’s quite a sharp turnaround from the start of the pandemic, when central banks around the world slashed rates to record lows and took other measures that supported stock prices in hopes of reigniting the economy. ‘economy.

These expectations are also driving US bond yields to their highest levels in years. The two-year Treasury yield climbed to 3.20% from 3.06% on Friday night, its second consecutive major move higher. It has more than quadrupled this year and reached its highest level since 2008.

The 10-year yield has risen from 3.15% to 3.27%, and the higher level will make mortgages and many other types of loans for households and businesses more expensive.

The spread between two-year and ten-year rates is also narrowing, a sign of increased pessimism in the bond market. If the two-year yield exceeds the 10-year yield, some investors see this as a sign of an impending recession.

The pain was global as investors braced for more aggressive moves from a coterie of central banks.

In Asia, the indices fell by at least 3% in Seoul, Tokyo and Hong Kong. Shares there were also hurt by concerns over COVID-19 infections in China, which could prompt authorities to resume tight restrictions that are slowing business.

In Europe, the German DAX lost 2.2% and the French CAC 40 fell 2.3%. The FTSE 100 in London fell 1.3%.

Some of the biggest hits have come from cryptocurrencies, which soared at the start of the pandemic when record high interest rates encouraged investors to bid for the riskiest investments. Bitcoin fell over 14% and fell below $23,400, according to Coindesk. It is back to where it was at the end of 2020 and down from a high of $68,990 at the end of last year.

On Wall Street, the S&P 500 was 20.9% below its record set at the start of the year. If it ends the day more than 20% of that level, it would officially enter what investors call a bear market.

The last bear market was not that long ago, in 2020, but it was exceptionally short and only lasted about a month.

It would also be the first bear market for many novice investors who got into stock trading for the first time after the pandemic, a time when stocks largely appeared to be going up. That is, they did so until inflation showed that it was worse than just a “transient” problem as originally portrayed.

AP Business Writer Elaine Kurtenbach contributed.

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