The S&P 500 hit a new 2022 closing low and the Dow Jones Industrial Average slipped into a bear market as interest rates jumped and turmoil rocked global currencies.
The S&P 500 fell 1.03% to 3,655.04, falling below the June closing low of 3,666.77. At one point in the day, the index fell to 3,644.76, within eight points of its 2022 intraday low: 3,636.87.
The Dow fell 329.60 points, or 1.11%, to 29,260.81, accelerating losses in the final moments of trading. The 30-stock index is down about 20.4% from its January 4 closing high. The Nasdaq Composite fell 0.6% to 10,802.92.
The pound fell to a record low on Monday against the US dollar, dropping 4% at one point to an all-time low of $1.0382. The pound has since hit its worst levels on speculation that the Bank of England may need to raise rates more aggressively to curb inflation.
The Federal Reserve’s aggressive bullish campaign, coupled with the UK tax cuts announced last week, pushed the US dollar higher. The euro has hit its lowest level against the dollar since 2002. A rise in the greenback can hurt the profits of US multinationals and also wreak havoc on global trade, much of which is traded in dollars.
“Such strength in the US dollar has historically led to some sort of financial/economic crisis,” Michael Wilson, Morgan Stanley’s chief US equity strategist, wrote in a note. “If there was a time to be on the lookout for something to break, this would be it.”
Bond yields jumped on Monday, with the 10-year Treasury yield topping 3.9% at one point in the day. This is its highest level since 2010.
The yield also jumped on the 2-year Treasury, which is particularly sensitive to Fed policy. The rate on the note topped 4.3%, the highest level since 2007.