Comment Wall Street stumbled on Monday, extending last week’s sell-off, as investors resumed jitters about inflation and the pace of interest rate hikes ahead of the Federal Reserve’s annual economic meeting. The Dow Jones industrial average ended the day at 33,063, down 643 points, or 1.9%. The broader S&P 500 lost 2.1 percent to close at just 4,138 points, while the tech-heavy Nasdaq shed 2.5 percent to end trading at just above 12,381. The losses follow Friday’s pullback, which shattered a summer rally that had given the S&P 500 four straight weeks of gains and lifted it from mid-June lows. That’s when the index went into a bear market — meaning it had lost 20% of its value from its most recent peak. Whether the recent losses are temporary or represent a change in direction remains to be seen. “While some bulls may be hoping that the summer rally means the bear market is behind us, it’s important to keep in mind that bear market rallies like this one are not uncommon,” Larkin said. The stock market is in bearish territory. What does this mean? Monday’s market jitters come as Fed officials prepare to gather in Jackson Hole, Wyo., for their annual economic conference. Investors are keenly interested in what Chairman Jerome H. Powell might have to say about inflation on Friday and any indication that the central bank may change course in its efforts to fight it. The gathering is separate from the central bank’s regularly scheduled policymaking meetings, during which the Federal Open Market Committee assesses economic conditions and sets monetary policy, including changing interest rates. The stock market’s steady sell-off through most of 2022 has been closely linked to the Fed’s campaign to curb red-hot inflation by raising interest rates. Higher interest rates curb spending, which in theory keeps prices from rising as quickly. The Fed has raised rates four times this year to that end, with three more hikes planned. But the central bank also runs the risk of raising interest rates too quickly and sending the economy into recession. The stock market’s most recent rally is largely due to softening inflation, which moderated to 8.5% last month thanks to falling gas and energy prices. But Powell has indicated that the central bank will need to see solid evidence that prices are under control before changing course. Investors now realize that the Fed still has a long way to go before it reaches its 2 percent inflation target, said Wayne Wicker, chief investment officer at MissionSquare Retirement. This suggests that there could be more market volatility. “I think we’re going to enter a period of uncertainty here,” Sand Hill Global Advisors chief investment officer Brenda Vingiello told CNBC. “We need more data to give us more clues about how far the Fed should go.” On Monday, riskier investments such as meme stocks and cryptocurrencies took a hit, causing heavy losses for these speculative assets. Bed Bath & Beyond continued its slide, dropping an additional 16.2% to $9.24. The home goods chain has been in freefall since two major shareholders liquidated their holdings last week, erasing most of the August rally that took it above $25 a share. AMC, another favorite of small investors, sank 42 percent on Monday after the owner of Regal Cinemas warned of a possible bankruptcy filing, underscoring the industry’s struggle to attract moviegoers after the pandemic. Cryptocurrencies also lost value, with bitcoin down 2.3 percent on Monday. Ford shares fell 5 percent after the automaker announced plans to cut 3,000 jobs as part of its shift to electric vehicles. Econ 101: What Causes Recessions? Meanwhile, European markets are also reeling over whether policymakers can control inflation without slowing growth too much. In Europe, too, central banks are reining in monetary policy to bring inflation under control, although they are raising interest rates at a slower pace than their American counterparts. Britain’s central bank recently posted its biggest interest rate hike since 1995, raising the prime rate by 0.5%. The European Union raised interest rates by a similar margin. Analysts believe they are moving more cautiously, in part, because the continent is facing an energy crisis linked to Russia’s invasion of Ukraine and its status as a major natural gas supplier. The chances of a recession are greater in Europe than in the United States, said LPL Financial chief economist Jeffrey Roach. The pan-European Stoxx 600 lost nearly 1 percent on Monday. Germany’s Dax lost 1.2% and Britain’s FTSE 100 fell 0.2%. China, meanwhile, faces a different challenge. The country’s troubled economy has seen a marked decline in economic growth, due in part to the “zero Covid” policy. A heat wave gripping much of the country is also forcing a slowdown in factory output there, said LPL Financial’s head of global strategy, Quincy Crosby. The country’s central bank is now in a position to cut interest rates to stimulate economic growth. Oil prices were largely flat on Monday, with West Texas Intermediate crude trading just above $90 a barrel and Brent crude, the global benchmark, trading below $97.
