Technology stocks that promise long-term growth are considered particularly vulnerable to rising interest rates because higher interest rates reduce the relative value of future earnings. “Nasdaq is the epicenter of interest rate uncertainty in the stock market,” said Julian Howard, chief investment officer at GAM. “[The Fed] it speaks of aggression, which makes the market quite nervous. The work is not done [on inflation].” The Fed has already raised interest rates three times this year in an effort to bring inflation down from 40-year highs, but officials have stressed the US central bank needs to go further. While Monday’s stock market decline appeared to be at odds with a strong rally in the third quarter, investors have warned that earlier gains do not show an increase in investor optimism after a terrible start to the year. “I’m not responding to this relief rally. I think we’re in for more downside risk markets for the rest of the year,” said Jamie Niven, senior fund manager at Candriam. Fed Chairman Jay Powell is expected to reaffirm his commitment to an aggressive rate hike at the central bank’s annual meeting in Jackson Hole, Wyoming this week. Joost van Leenders, senior investment strategist at Van Lanschot Kempen, predicted Powell “[will] justify why they are raising rates so quickly and why they should.’ Citigroup economist Andrew Hollenhorst said: “We continue to expect a relatively hawkish speech.” The hawkish outlook was reflected in government bond markets, with the yield on the policy-sensitive 2-year Treasury note rising 0.06 percentage points to 3.32%. The 2-year yield has risen from less than 1 percent at the end of last year and was around 2.5 percent as recently as late May. The yield on the benchmark 10-year bond rose above 3 percent for the first time in a month.

The higher yields reflect the lower prices, and traders on Monday said they saw a flurry of buying of put options on Treasury futures – bets that futures will fall in value. John Brady, managing director of futures brokerage RJ O’Brien, said the bearish bets, including many expiring Friday, were executed to guard against a further sell-off in the Treasury market after the Jackson Hole summit. In currency markets, the euro fell 0.9 percent against the dollar to $0.994, falling below $1 for the second time this summer. It had achieved parity with the dollar in July for the first time in two decades. Concerns about possible cuts to Russian energy supplies sent European gas and electricity prices higher on Monday, heightening fears that the continent could slide into recession. The regional Stoxx Europe 600 share index closed 1 percent lower, with Germany’s Dax down 2.3 percent. The dollar index, which tracks the U.S. currency against a basket of peers and tends to rise in times of uncertainty, rose 0.7 percent. The index has risen nearly 3 percent this month, returning near the two-decade high reached in July. Shares in Asia largely followed Wall Street lower on Tuesday morning, with Japan’s Topix down 1.1 percent and Australia’s S&P/ASX 200 down 0.5 percent. Hong Kong’s Hang Seng was flat. On Monday, shares in mainland China rallied after the People’s Bank of China cut its mortgage interest rate for the second time this year in a bid to shore up its debt-ridden property sector. Additional reporting by Eric Platt in New York and Hudson Lockett in Hong Kong