The Dow sank more than 600 points as investors fretted over the Fed’s next move

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Wall Street stumbled on Monday, extending last week’s sell-off, as investors worried about the pace of inflation and interest rates rising ahead of the Federal Reserve’s annual economic conference.

The Dow Jones industrial average ended the day at 33,063, down 643 points, or 1.9 percent. The broader S&P 500 fell 2.1 percent to end just shy of 4,138, while the tech-heavy Nasdaq erased 2.5 percent to end trading at 12,381.

The losses followed Friday’s pullback, as the S&P 500 snapped a summer rally that had given it four straight weeks of gains and lifted it from its mid-June highs. That’s when the index entered a bear market — meaning it lost 20 percent of its value from its most recent peak. Whether the recent losses are temporary or represent a change in direction remains to be seen.

“While some bulls believe the summer rally is a bear market behind us, it’s important to remember that bear market rallies like this one are not uncommon,” Larkin said.

The stock market is in bear territory. What does that mean?

Market jitters on Monday came as Fed officials prepared to meet in Jackson Hole, Wyo. Annual Economic Seminar. On Friday, President Jerome H. Investors are interested in what Powell has to say and a sign that the Fed may be changing course in efforts to combat it.

The meeting differs from the Fed’s regularly scheduled policy-making meetings, during which the Federal Open Market Committee assesses economic conditions and decides on monetary policy, including changing interest rates.

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The stock market’s sustained sell-off through much of 2022 is closely linked to the central bank’s campaign to curb red-hot inflation by raising interest rates. Higher rates reduce spending, which theoretically keeps prices from rising too quickly. The central bank has raised rates Four times By that end this year, three more increases are planned. But the central bank also risks raising rates too quickly and pushing the economy into recession.

The most recent stock market rally was largely driven by easing inflation Reduced to 8.5 percent Thanks to falling gas and energy prices last month. But Powell indicated that the Fed would need to see consistent evidence that prices are under control before it changes course.

Investors now realize the Fed still has a long way to go to reduce inflation to its 2 percent target, said Wayne Wicker, chief investment officer at MissionSquare Retirement. This suggests that further market volatility may be on the way.

“I think we’re going to enter a tumultuous period here,” Brenda Wingiello, chief investment officer at Sand Hill Global Advisors, told CNBC. “We need more data to give us an indication of how far the feds have to go.”

On Monday, riskier investments such as meme stocks and cryptocurrencies took a hit, triggering steep losses for those speculative assets.

Bed Bath & Beyond continued its descent, falling an additional 16.2 percent to $9.24. The housewares chain has been in free fall since two major shareholders dumped their shares last week, taking much of August’s rally above $25 a share. AMC, another favorite of small investors, fell 42 percent on Monday, after the owner of Regal Cinemas warned of a bankruptcy filing, underscoring the industry’s struggle to win back moviegoers after the pandemic. Cryptocurrencies also lost value, with bitcoin down 2.3 percent on Monday.

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Ford shares fell 5 percent after the automaker announced plans to cut 3,000 jobs as part of its shift to electric vehicles.

Econ 101: What caused the recession?

Meanwhile, European markets are also grappling with whether policymakers can rein in inflation without slowing growth.

In Europe, too, central banks are tightening monetary policy to bring inflation under control, although they are raising rates at a slower pace than their American counterparts. Recently the Bank of England provided It raised its prime interest rate by 0.5 percent, its biggest rate increase since 1995. European union Raised The rates are identically different.

Analysts believe they are moving more cautiously as the continent faces an energy crisis linked to Russia’s invasion of Ukraine and its status as a major supplier of natural gas. The odds of a recession are higher in Europe than in the U.S., said Jeffrey Roche, chief economist at LPL Financial.

The pan-European Stoxx 600 lost nearly 1 percent on Monday. Germany’s Tax index lost 1.2 percent, while the UK’s FTSE 100 fell 0.2 percent.

Meanwhile, China faces a different challenge. The country’s ailing economy has seen a significant decline in economic growth, stemming in part from its “zero Covid” policy. Quincy Crosby, chief global strategist at LPL Financial, said the heat wave engulfing a good part of the country is causing a slowdown in factory production there.

The country’s central bank is currently in a position to cut interest rates to stimulate economic growth.

Oil prices were largely flat on Monday, with West Texas Intermediate crude trading just above $90 a barrel and Brent crude, the global benchmark, trading below $97.

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