Damian J. Troise

The Dow Jones Industrial Average became the latest of major U.S. stock indexes to fall into what is known as a bear market on Monday as the market deepened its slump amid growing fears of a global recession.

The S&P 500 fell 38.19 points, or 1%, to 3,655.04, the Dow Jones Industrial Average fell 329.60 points, or 1.1%, to 29,260.81, and the Nasdaq fell 65 points, or 0.6%, to 10,802.92. All three indices are now in a bear market, defined as a drop of at least 20% from their highs and the S&P 500 closed at a new 2022 low.

Monday’s losses were significant and included banks, healthcare companies and retailers. Casino and resort operators have been brighter following reports that Macau’s gaming center will ease travel restrictions in November.

The pound fell to an all-time low against the dollar and investors continued to dump UK government bonds, unhappy with the sweeping tax cut package announced in London last week.

Treasury yields have continued to rise as the Federal Reserve and other global central banks step up their fight against inflation.

Global economic concerns weigh on the market

Markets in Europe were mostly down. The head of the European Central Bank has warned that the economic outlook is “darkening” as high energy and food prices pushed up by war in Ukraine sap consumers’ purchasing power. France, the EU’s second largest economy, forecasts a substantial slowdown in economic growth next year.

Stocks were weighed down by worries about stubbornly high inflation and the risk that central banks could push economies into a recession as they try to cool high prices for everything from food to clothes. Investors were particularly focused on the Federal Reserve and its aggressive interest rate hikes.

“We’re starting to move from fears about inflation and the Fed to global economic concerns,” said Mark Hackett, head of investment research at Nationwide. “We have reached a universal degree of pessimism.”

The Fed raised its benchmark rate, which affects many consumer and business loans, again last week and it is now in a range of 3% to 3.25%. It was almost nil at the start of the year. The Fed also released a forecast suggesting that its benchmark rate could be 4.4% by the end of the year, one point higher than expected in June.

The goal is to make borrowing more expensive and effectively reduce spending, which would curb inflation. But the U.S. economy is already slowing, and Wall Street worries that the Fed’s rate hikes could dampen the economy too hard and trigger a recession.

Rising interest rates hurt all types of investments, especially expensive tech stocks, and the market saw a broad meltdown as rates rose. Treasury yields have hit multi-year highs as interest rates rise.

The 2-year Treasury yield, which tends to track Federal Reserve action expectations, rose significantly to 4.34% from 4.21% late Friday. It is trading at its highest level since 2007. The 10-year Treasury yield, which influences mortgage rates, jumped to 3.91% from 3.69% on Friday, reaching the highest level since 2010.

The recent appreciation of the US dollar against other currencies is of concern to many countries. This reduces the profits of American companies with operations abroad and puts financial pressure on much of the developing world.

Business profits and economic data at your fingertips

Companies are approaching the end of the third quarter and investors are preparing for the next round of earnings reports. This will give them a better idea of ​​how companies are handling persistent inflation.

Slowdown fears:A recession is now likely in 2023. Here’s what could trigger a sharp downturn in the economy

Stagflation or recession? :The United States could be threatened with stagflation. Here’s what that means.

Investors also have several economic reports available for this week that will provide more detail on consumer spending, the labor market and the broader health of the US economy.

The latest report on consumer confidence, for September, from the business group The Conference Board will be released on Tuesday. The government will release its weekly report on unemployment benefits on Thursday, along with an updated report on gross domestic product for the second quarter.

On Friday, the government will release another personal income and spending report that will help provide more detail on where and how inflation is hurting consumer spending.