New York (CNN Business)US stocks have plunged into a bear market as Wall Street investors grew increasingly nervous about the prospect of even harsher medicine from the Fed to take the sting out of inflation.
The Dow (INDU) sank 876 points or 2.8%. The Nasdaq was down by 4.7% and has tumbled more than 10% in the past two trading sessions.
The broader S&P 500 fell 3.9%. That index is now more than 20% below its all-time high set in January, putting stocks in a bear-market.
Recession fears mounted after Friday’s miserable Consumer Price Index report showed US inflation was significantly higher than economists had expected last month. That could make the Federal Reserve’s inflation-control efforts more difficult.
The Fed may have to do something it hasn't done since 1994 to tame inflation
The Fed may have to do something it hasn’t done since 1994 to tame inflation
After raising rates by a half point in May — an action the Fed hadn’t taken since 2000 — Chair Jerome Powell pledged more of the same until the central bank was satisfied that inflation was under control. At that point, the Fed would resume standard quarter-point hikes, he said.
But after May’s hotter-than-expected inflation report, Wall Street is increasingly calling for tougher action from the Fed to keep prices under control. Jefferies joined Barclays on Monday in predicting that the Federal Reserve would hike rates by three-quarters of a percentage point, an action the Fed hasn’t taken since 1994.