U.S. Stocks Extending Sell-Off Amid Worries About Inflation, Interest Rates

Stocks have moved sharply lower during trading on Monday, extending the sell-off seen in the previous week. With the steep drop on the day, the major averages have fallen to their lowest intraday levels in over a year.

The major averages have seen further downside in recent trading, hitting new lows for the session. The Dow is down 825.74 points or 2.6 percent at 30,567.05, the Nasdaq is down 486.76 points or 4.3 percent at 10,853.26 and the S&P 500 is down 141.62 points or 3.6 percent at 3,759.24.
The extended sell-off on Wall Street reflects lingering concerns about inflation and the outlook for interest rates after last Friday’s report showing a jump in consumer prices.

The Federal Reserve is scheduled to announce its latest monetary policy decision on Wednesday, with the central bank expected to continuing raising interest rates in an effort to combat inflation.

CME Group’s FedWatch Tool is currently indicating a 64.4 percent chance of a 50 basis point rate hike and a 35.6 percent chance of a 75 basis point rate increase.

While the Fed’s rate hikes have been widely anticipated for months, traders seem increasingly concerned tighter monetary policy could trigger a period of stagflation or an outright recession.

Energy stocks are seeing substantial weakness on the day, moving lower along with the price of crude oil. Crude for July delivery is currently tumbling $1.94 to $118.73 a barrel.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index is down by 8.4 percent and the NYSE Arca Oil Index is down by 6.6 percent.

Significant weakness is also visible among airline stocks, as reflected by the 7.6 percent nosedive by the NYSE Arca Airline Index.

Steel stocks are also seeing considerable weakness amid concerns about Chinese demand, with the NYSE Arca Steel Index plunging by 6.3 percent.

Gold, natural gas, semiconductor and housing stocks have also moved notably lower amid another broad-based sell-off on Wall Street.

In overseas trading, stock markets across the Asia-Pacific region moved sharply lower during trading on Monday. Japan’s Nikkei 225 Index tumbled by 3 percent, while China’s Shanghai Composite Index slid by 0.9 percent.

The major European markets have also shown notable moves to the downside. While the U.K.’s FTSE 100 Index is down by 1.9 percent, the German DAX Index is down by 2.7 percent and the French CAC 40 Index is down by 2.8 percent.

In the bond market, treasuries are extending the steep drop seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 14.1 basis points at 3.297 percent.