The S&P 500 notched a new closing low for 2022 and the Dow Jones Industrial Average slipped into a bear market as interest rates surged and turmoil rocked global currencies.
The S&P 500 declined 1.03% to 3,655.04, falling below the June closing low of 3,666.77. At one point during the day, the index dipped to 3,644.76, less than eight points away from its intraday low of 2022: 3,636.87.
The Dow dropped 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 Jan. 4 closing high. The Nasdaq Composite fell 0.6% to 10,802.92.
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The British pound dropped to a record low on Monday against the U.S. dollar, falling 4% at one point to an all-time low of $1.0382. The pound has since come off its worst levels on speculation that the Bank of England may have to raise rates more aggressively to tamp down inflation.
The Federal Reserve’s aggressive hiking campaign, coupled with the U.K.’s tax cuts announced last week has caused the U.S. dollar to surge. The euro hit the lowest versus the dollar since 2002. A surging greenback can hurt the profits of U.S. multinationals and also wreak havoc on global trade, with so much of it transacted in dollars.
“Such U.S. dollar strength has historically led to some kind of financial/economic crisis,” wrote Morgan Stanley’s Michael Wilson, chief U.S. equity strategist, in a note. “If there was ever a time to be on the lookout for something to break, this would be it.”
Bond yields leapt on Monday, with the 10-year Treasury yield topping 3.9% at one point during the day. That marks its highest level since 2010.
The yield also jumped on the 2-year Treasury, which is especially sensitive toward Fed policy. The rate on the note surpassed 4.3%, the highest level since 2007.
