The stock market fell once more on Monday, with the S&P 500 closing in bear market territory. Bond yields have risen to new highs as investors remain concerned about Fed rate hikes.
The S&P 500 fell nearly 4%, entering bear market territory, meaning the broad benchmark index has now fallen more than 20% from its most recent high.
Other indexes fell as well, with the Dow Jones Industrial Average falling 2.8 percent, or nearly 900 points, and the Nasdaq falling nearly 4.7 percent.
The declines were precipitated by a stronger-than-expected inflation report on Friday, which raised concerns that the Federal Reserve will need to raise interest rates even more aggressively this year.
According to the Wall Street Journal, the latest inflation data could prompt the Fed to raise its short-term interest rate by three-quarters of a percentage point.
No one expects the Fed to stop there, with markets bracing for a series of larger-than-usual hikes to come.
While the labour market remains strong – unemployment was 3.6 percent in May, close to a half-century low – the stock market selloff is a sharp contrast to earlier in the pandemic.
The two-year Treasury yield jumped to 3.23 % from 3.06 % late Friday, its second consecutive major increase.
This year, it has more than quadrupled and reached its highest level since 2008.
Cryptocurrencies took some of the biggest hits, as they soared early in the pandemic as record-low interest rates encouraged some investors to pile into the riskiest investments.
According to Coindesk, Bitcoin has dropped more than 18% and is now trading below $22,700.
It has returned to where it was in late 2020, having peaked at $68,990 late last year.