By Yasin Ebrahim
Investing.com -- The Dow fell sharply Monday, as worries about the economy rattled investors ahead of a widely expected Federal Reserve rate hike later this week that many fear could pave the way for more aggressive action to bring down inflation.
The Dow Jones Industrial Average fell 2.8%, or 876 points, the Nasdaq was down 4.7% and the S&P 500 3.8%, taking its total losses since its recent peak above 20% into bear-market territory and a new low for the year.
A part of the Treasury yield curve - the 10-year Treasury yield over the 2-year Treasury yield - briefly inverted intraday, stoking inflation worries on growing concerns the Fed will be forced to take up a more aggressive stance on policy to rein in inflation.
As the 10-year Treasury yield climbed to its highest level since 2011, growth sectors of the market including consumer discretionary and tech were the biggest drag on the broader market.
Tesla (NASDAQ:TSLA) fell more than 7% 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), which were down more than 5% and 6% respectively, 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, travel and leisure, which are vulnerable to a weaker consumer and economy, ended the day deep in the red.
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.