Bear market hits Wall Street as stocks, bonds, crypto dive

NEW YORK — Wall Street tumbled into what’s called a bear market Monday after fears about a fragile economy and rising interest rates sent the S&P 500 more than 20% below its record set early this year.

The index sank 3.9% in the first chance for investors to trade after getting the weekend to reflect on the stunning news that inflation is getting worse, not better. The Dow Jones Industrial Average was briefly down more than 1,000 points before finishing with a loss of 876.

At the center of the sell-off again was the Federal Reserve, which is scrambling to get inflation under control. Its main method to do that is to raise interest rates in order to slow the economy, a blunt tool that risks a recession if used too aggressively.

With the Fed seemingly pinned into having to get more aggressive, prices fell in a worldwide rout for everything from bonds to bitcoin, from New York to New Zealand. Some of the sharpest drops hit what had been big winners of the easier low-rate era, such as high-growth technology stocks and other former darlings of investors. Tesla slumped 7.1%, and Amazon dropped 5.5%. GameStop tumbled 8.4%.

“The best thing people can do is to not panic and don’t sell at the bottom,” said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research, “and we’re probably not at the bottom.”

Some economists are speculating the Fed on Wednesday may raise its key rate by three-quarters of a percentage point. That’s triple the usual amount and something the Fed hasn’t done since 1994.

Traders now see a 28% probability of such a mega-hike, up from just 3% a week ago, according to CME Group.

No one thinks the Fed will stop there, with markets bracing for a continued series of bigger-than-usual hikes. Those would come on top of some discouraging signals about the economy and corporate profits, including a record-low preliminary reading on consumer sentiment soured by high gasoline prices.