(CNN Business) –– Wall Street once again had a day with red figures this Monday with the Dow plummeting, while investors concerned that the Federal Reserve’s plans of raising interest rates affect corporate profits. Tensions in Ukraine, earnings season and of course inflation didn’t help the picture either.
The Dow fell 1,000 points, or 3%, by midday.
The S&P 500, the broadest measure of the US stock market, was headed to end the day in correction territory: down 10% from its most recent high.
In fact, the S&P 500 was trading 3.7% lower at midday. Last week, the index posted its worst week since March 2020.
El Nasdaq Composite, which was in correction territory last week, was the morning’s biggest loser with a 4.5% drop.
Every day of last week, stocks underperformed in the last hour of trading, which tends to be a bad sign for the next day, said TD Ameritrade Chief Market Strategist JJ Kinahan. That negative sentiment continued on Monday.
There’s a lot to digest
Investors also have a lot at stake this week.
Earnings season has passed for big tech companies, including Microsoft, IBM, Intel and Apple, which report results this week.
Then there is the Federal Reserve meeting, which will conclude with the policy statement this Wednesday and the subsequent press conference. On Monday morning, market expectations for this week are that the central bank will keep interest rates close to zero for a bit longer, according to the tool. CME FedWatch. But for the next meeting, which will be in March, expectations for a quarter percentage point rate hike are above 80%.
Now, expectations are only part of what is at stake. The Fed could also conclude that inflation has gotten too high by the end of 2021 and raise rates further… or even sooner.
Treasury yields, which track interest rate expectations, came in below last week’s highs on Monday. The 10-year bond yielded 1.72% at noon after topping 1.8% last week for the first time since before the pandemic.
As the Federal Reserve tries to reduce inflation by normalizing its pandemic-era policies, the US economy is grappling with consequences of the omicron variant. U.S. private-sector production growth slowed in January as the highly infectious variant put more pressure on an already battered supply chain and existing labor shortages, according to the report. IHS Markit Flash Purchasing Managers Composite Index.
To make matters worse, investors look anxiously at the situation in Ukraine, while fears are growing that the country could be invaded by Russia.
The news that the United States and the United Kingdom are withdrawing some of the staff from local embassies doesn’t exactly build confidence that the situation will be resolved quickly. In fact, European stock markets are also down considerably.
Commodity markets are coming under pressure from rising tensions and analysts believe oil prices could soar if the situation escalates. On Monday, however, US oil prices fell 3.3%, or nearly $2.90 a barrel, to $82.31 by midday.
Julia Horowitz of CNN Business contributed to this report.