By Yasin Ebrahim
Investing.com -- The S&P 500 fell into bear-market territory on Monday, following a sea of red in growth stocks as Treasury yields surged on bets that the Federal Reserve is set to lean more hawkish to tackle inflation.
The S&P 500 fell 3.5%, taking its total losses since its recent peak above 20% into bear-market territory. The Dow Jones Industrial Average fell 2.5%, or 783 points, the Nasdaq was down 4.2%.
The 10-year Treasury yield climbed to its highest level since 2011 on concerns the Fed will be forced to step on the monetary policy tightening accelerator following the upside surprise in Friday’s inflation data.
Growth sectors of the market including consumer discretionary and tech were the biggest drag on the broader market.
Tesla (NASDAQ:TSLA) fell more than 6% to lead the decline in consumer discretionary amid worries about the impact of the potential lockdown measures in Beijing following a spike in Covid-19 cases.
Big tech was led lower by Amazon (NASDAQ:AMZN) and Meta Platforms (NASDAQ:META), each down more than 5%, as bets on rising rates dent investor appetite for stocks with higher valuations.
The U.S. central bank is expected to raise its benchmark rate by 0.5% this week, but could signal a willingness to do more following recent data showing price pressures continue to run hot.
“The FOMC is likely to respond to the firmer inflation print and the rise in long-term inflation expectations with a resolutely hawkish message at the June meeting, in addition to the 50bp rate hike it is set to deliver,” Goldman Sachs said in a note.
Against the backdrop for a more aggressive Fed, expectations are growing that the central bank could slow the economy into recession leading to a weaker consumer. That would hurt demand for travel and leisure.
Caesars Entertainment (NASDAQ:CZR), American Airlines (NASDAQ:AAL), Norwegian Cruise Line (NYSE:NCLH) and Booking Holdings (NASDAQ:BKNG) were down sharply.
Energy, meanwhile, struggled to cut losses even as oil prices turned positive despite concerns that rising Covid-19 cases in China could slow energy demand
Pioneer Natural Resources (NYSE:PXD), Phillips 66 (NYSE:PSX), and ConocoPhillips (NYSE:COP) were among the biggest decliners in the sector.
Cryptocurrency-related stocks were deeply in the red following a rout in cryptocurrencies triggered by crypto lending company Celsius Network freezing withdrawals and transfers.
MicroStrategy (NASDAQ:MSTR), Block (NYSE:SQ) and Coinbase Global (NASDAQ:COIN) were down double digits.