US stocks fell into the bear market on Monday, down 20 percent from their January peak, a sign of growing pessimism about the outlook for the economy.
Markets around the world tumbled as higher-than-expected inflation and lower-than-expected economic growth turned the outlook for interest rates and corporate earnings on their head. Stocks in Asia and Europe fell, investors dumped government bonds, oil prices tumbled and cryptocurrencies plummeted.
The S&P 500 fell 3 percent in afternoon trade as a sell-off continued. The S&P 500 dipped briefly into the bear market last month before recovering and closing just above it. Markets have been jittery ever since, with the S&P 500 posting its worst weekly loss since January last week.
The US benchmark stock index is now “within a bad day of a bear market and stock futures are suggesting we haven’t seen all the negative sentiment yet,” analysts at ING wrote in a note to investors Monday morning. The S&P 500 has fallen in nine of the last ten weeks.
A report on Friday showed a surge in inflation in the United States, which rattled markets as investors feared the Federal Reserve might have to hike interest rates higher and faster than expected to stem rising prices, a move that could US economy could hit .
Global investors sold stocks, bonds and other assets as inflation is high in many countries, supply chains remain in turmoil and economic growth forecasts are revised downwards.
Stock markets in Asia ended deep in the red, with Japan’s benchmark Nikkei 225 index falling 3 percent and South Korea’s Kospi falling 3.5 percent. In Hong Kong, shares fell 3.4 percent, while an index of China’s largest companies listed in Hong Kong fell 3.6 percent. The Japanese yen fell to a 24-year low against the US dollar.
Fears in the region were heightened on Monday after officials in Beijing and Shanghai reinstated social distancing measures following another round of mass testing over the weekend. China’s economic growth has been hit by the country’s “zero-Covid” pandemic policy, which put much of the country under some form of lockdown for months earlier this year.
In Europe, the Stoxx 600 index fell 2.4 percent, hitting its lowest level since early 2021. Britain’s FTSE 100 fell 1.5 percent after news the country’s economy contracted unexpectedly in April and from March fell by 0.3 percent. Economists had expected a slight increase in growth.
European bond prices fell sharply as traders priced in a series of rate hikes by the European Central Bank in response to high inflation across the euro zone. Yields on German and Italian government bonds, which are moving in the opposite direction to prices, are reaching multi-year highs, which implies a sharp increase in the cost of borrowing.
More on today’s market turmoil:
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The cryptocurrency market melted again as Bitcoin’s price fell to its lowest level since 2020, wiping out years of investment. Bitcoin fell to around $23,000, its lowest since December 2020. READ MORE →
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Investors are bracing for the economic fallout as central banks, including the Federal Reserve, seek to curb rapid inflation. The Fed had signaled it was likely to hike rates by half a percentage point at its meeting this week and another half a point in July. But investors have now started planning for an even bigger move ahead of their September meeting. READ MORE →
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The last bear market was in early 2020 as the coronavirus spread and led to widespread global shutdowns. It was also the shortest since records began. Stocks lost a third of their value in 33 days this year. But the recovery was relatively quick, with markets recouping losses within six months. READ MORE →
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