U.S. stocks plunged in early trading Monday as investors fretted over mounting inflation and geopolitical tensions, before making up that ground in afternoon trading as financial markets whipsawed.
The S&P 500 slumped in morning trade to enter what the market considers a "correction" — a drop of 10% or more from its most recent high. The stock index is down nearly 11% from the high it set on January 4. That amounts to the worst-ever start to a new year for the S&P 500, according to Bloomberg.
Extending a run of losses, the Dow fell more than 1,000 points Monday morning, or nearly 3%, to 33,256, and was down about 10% from its high on January 4. The tech-heavy Nasdaq Composite declined 4.4% in morning trade, extending the recent losing streak from its November high to nearly 18% — a figure approaching the 20% decline marker that defines a "bear"market.
But markets regained those losses in the afternoon to end the day in positive territory. The S&P 500 closed at 4,410, up 0.3%, while the Dow and Nasdaq rose 0.3% and 0.6%. "Panicked selling in equities quickly turned into a heroic comeback," analysts at TD Securities said in a report.
Awaiting key Fed decision this week
Investors have been growing increasingly worried about how aggressively the Federal Reserve, which holds a policy meeting this week, might act this year to cool rising inflation. Consumer, the biggest increase in nearly 40 years.
Wall Street anticipates the first Fed increase in interest rates as early as March, and investors have grown increasingly concerned the Fed will have to raise rates more quickly and more often than the central bank originally indicated.
The Fed's benchmark short-term interest rate is currently in a range of 0% to 0.25%. Investors now see a nearly 70% chance that the Fed will raise the rate by at least one full percentage point by the end of the year, according to CME Group's Fed Watch tool.
Fed policymakers will release their latest statement on Wednesday.
"The path for rate hikes will depend critically on the future pace of inflation and the intersection with wage growth," Kathy Bostjancic, chief U.S. financial economist with Oxford Economics, said in a note.
Inflation is putting pressure on businesses and consumers as demand for goods continues to outpace supplies. Companies have been warning that supply chain problems and rising raw materials costs could crimp their finances. Retailers, food producers and others have been raising prices on goods to try and offset the impact.
Rising costs are stoking concerns consumers will start to ease spending because of the persistent pressure on their wallets.
Sara Johnson, executive director of IHS Markit, expects inflation and the withdrawal of fiscal and monetary policy stimulus to weigh on the economy. The research firm on Monday forecast that growth in gross domestic product — the total value of products and services — would slow to 4.1% in 2022, from 5.7% last year. By contrast, the U.S. could get a lift amid signs that the rate of COVID-19 infections linked to the Omicron variant are abating in some parts of the country.
On Monday, the energy and raw materials sectors led the markets' declines. Technology stocks were among the heaviest weights on the market as investors shift money away from pricier stocks in anticipation of rising interest rates. Higher rates make shares in high-flying tech companies and other expensive growth stocks relatively less attractive.
Rising tensions between Russia andare also roiling Wall Street. The State Department has ordered families of U.S embassy employees in Kyiv, Ukraine, to and authorized some U.S. government employees to depart due to the potential of Russian military action.
The decisions were made out of an abundance of caution due toand disinformation campaigns, a separate senior State Department official said. Russia is major oil producer, and experts warn that a significant disruption in the country's supplies on the global market could lead to higher energy prices in the U.S.
on Ukraine's border, and although the U.S. does not know if Russian President Vladimir Putin has made a decision to invade or if a decision is imminent, he has built the military capacity to invade at any point, one of the officials said
for more features.