Damien J. by Trois , The Associated Press
Stocks sank in early morning trading on Wall Street Monday, keeping the benchmark S&P 500 on track in what the market considers a correction — a drop of 10% or more from its most recent high.
The S&P 500 is down 2.5% at 4,287.22 as of 10:15 a.m., and is now down about 10.7% from its January 4 high. A closer to 4,316.90 or less would put it in a correction.
The market fall extends recent losses that have left major indices in a January slump. The Dow Jones Industrial Average fell 712 points, or 2.1%, to 33,544 and the Nasdaq fell 3%.
Investors are becoming increasingly concerned about how aggressively the Federal Reserve, which holds a policy meeting this week, may act to quell rising inflation. Wall Street anticipates the first hike in interest rates in early March, and investors have become increasingly concerned that the Fed will have to raise rates more quickly and more frequently than the central bank originally indicated. .
The Fed’s benchmark short-term interest rate is currently in the 0% to 0.25% range. According to CME Group’s Fed Watch tool, investors now have about a 70% chance that the Fed will raise at least one percentage point by the end of the year.
Federal Reserve policymakers will issue their latest statement on Wednesday.
On Monday, the energy and raw materials sectors led the decline. Mining concern Freeport McMoran fell 4.6% and General Motors 4%.
Technology stocks were among the heaviest loads on the market as investors move money from more expensive stocks in anticipation of rising interest rates. The higher rates make it relatively less attractive in high-flying tech companies and other expensive growth stocks.
Apple dropped 1.7% and Microsoft 1.8%.
A wide range of retailers, travel-related companies and others that rely on direct consumer spending also fell sharply and weighed down the broader market. Target dropped 1.1% and Carnival fell 5%.
Bond yields fell. The yield on the 10-year Treasury fell to 1.72% from 1.74% late Friday.
Falling yields also weighed on banks, which depend on higher returns to charge more attractive interest on loans. Bank of America dropped 3.8%.
Inflation is putting pressure on businesses and consumers as demand for goods outpaces supply. Companies have been warning that supply chain problems and rising raw material costs could jeopardize their finances. Retailers, food producers and others are raising prices on items to lessen the impact.
Rising costs are raising concerns that consumers will start reducing spending due to the continued pressure on their wallets.
Investors are monitoring the latest round of corporate earnings to learn how companies are dealing with higher prices and what they plan to do as inflationary pressures operate.
Monday is a relatively quiet day for earnings, but the momentum picks up on Tuesday with American Express, Johnson & Johnson and Microsoft reporting results. Boeing and Tesla reported their results on Wednesday. The reports from McDonald’s, Southwest Airlines and Apple came on Thursday.
Wall Street also has several major economic reports to look forward to this week. Investors will get more data on how consumers feel with the release on Tuesday of the Conference Board’s Consumer Confidence Index for January. The Commerce Department releases its report on fourth-quarter GDP on Thursday and its report on personal income and spending for December on Friday.