The crisis roiling U.S. stocks went from bad to worse on Monday as the S&P 500 closed in a fresh bear market, complicating the next move by the Federal Reserve.
The broadest measure of the stock market fell 3.9% or 151 points and is now off 22% from its Jan. 4 high of 4,796.56.
The selloff has erased over $9 trillion in market value, according to Bespoke Investment Group, that’s $1.2 trillion more than during the Financial Crisis of 2007-2009 the firm detailed in a research note.
The Dow Jones Industrial Average has fallen 16% this year, while the Nasdaq Composite has lost 31% through Monday.
The bond market saw its own volatility as the two-year and 10-year Treasury yield curve briefly inverted early Monday morning, a known predictor of a recession. Both yields are sitting at 52-week highs of 3.379% and 3.371%, respectively.
Falling stocks and rising yields come ahead of the Federal Reserve’s decision on interest rates due Wednesday. Investors also got word via a Wall Street Journal report released Monday afternoon that policymakers are reconsidering a 0.75% rate hike, in a possible surprise to the market.
"To come back now, they’re sort of damned if they do, damned if they don’t," NatWest Markets head of US Michelle Girard told FOX Business. "It would look like they had to reverse course like they’re panicked. I just don’t know if the Fed just chooses to just signal that more rate hikes of 50 basis points or more are likely further into the fall than what they had initially expected."
The possible, more aggressive tightening cycle, also follows consumer inflation data for May that surged 8.6%, more than expected last week, and a possible producer price index reading, due Tuesday, that may hit 11%, according to economists' estimates.
Noted economist David Rosenberg also warned the Fed is in unchartered territory.
"We've had 8% inflation before. Been a while, but we've had it. What we've never had before was the Fed hiking rates into an official bear market. Brand spanking new. More downside coming" he tweeted.
And it's worth noting consumers are feeling crummy, particularly about record-high gas prices, which crossed above $5 a gallon over the weekend, as tracked by AAA. Even before that new high, the University of Michigan’s preliminary sentiment index for June tumbled to a record low.
"Consumers' assessments of their personal financial situation worsened about 20%. Forty-six percent of consumers attributed their negative views to inflation, up from 38% in May; this share has only been exceeded once since 1981, during the Great Recession" wrote Surveys of Consumers Director Joanne Hsu.