Stocks fell Monday on fears that the Federal Reserve may continue tightening until it steers the economy into a recession.
The Dow Jones Industrial Average fell by 410 points, or 1.2%, while the S&P 500 and Nasdaq Composite slid by 1.5% and 1.6%, respectively.
A hotter-than-expected reading of November ISM Services further fueled concerns that the Fed will continue hiking. The index posted a 56.5% reading, topping the Dow Jones estimate of 53.7% and increasing from October.
Bond yields pushed higher as equities fell, with the yield on the benchmark 10-year Treasury last trading up 8 basis points at 3.586%.
“Clearly, equity markets want to move higher, but that’s very dependent on inflation getting under control,” said Peter Essele, head of portfolio management at Commonwealth Financial Network. “And so, when you have above expectation prints on any econ number that comes out, that tends to fuel inflationary concerns, which sends rates higher.”
Investors are watching for fresh economic data ahead of next week’s Federal Reserve policy meeting. Following a speech last week by Fed Chairman Jerome Powell, markets largely expect the central bank will approve a 0.5 percentage point interest rate increase. That would mark a step down from a series of four straight 0.75 percentage point hikes.