Stocks continued their losing spree on Monday, sending
the S&P 500 down more than 20% from its record high, amid concerns that a
recession is more likely given how unshakeable inflation has become.

The
S&P 500 was 115.18 points or 2.94% down at 3,785.25 in the morning trading
after investors had the weekend to reflect on a stunning report that showed
inflation is getting worse, not better as some had hoped. The Dow Jones
Industrial Average was down 736.37 points or 2.35% down to 30,656.42 as of
10:15 a.m. Eastern time zone.

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Wall Street continued to watch the Federal Reserve, which
is scrambling to get inflation under control. Its main way to do that is to
hike interest rates to slow the overall economy, a blunt tool that carries the
risk of causing a recession if used too aggressively.

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The market is expecting the Fed to raise its key
short-term interest rate by three-quarters of a percentage point, later this
week. That’s three times the usual amount and something the Fed hasn’t done
since 1994. According to CME Group, traders now see a 42% probability of such a
mega-hike, up from just 3% a week ago.

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The market is bracing for a continued series of
bigger-than-usual hikes. Additionally, high gasoline prices contributed to a
record-low preliminary reading on consumer sentiment, along with other
discouraging signals about the economy and corporate profits.

Such anticipations are also sending US bond yields to
their highest levels in years. The two-year Treasury yield shot to 3.20% from
3.06% late Friday, its second straight hike. It’s more than quadrupled this
year and touched its highest level since 2008.

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The 10-year yield rose to 3.27% from 3.15%, and the
higher level will make mortgages, home loans and other loans for businesses
more expensive.

The gap between the two-year and 10-year yields is also
decreasing, a signal of increased pessimism in the bond market. If the two-year
yield is higher than the 10-year yield, some investors see it as a sign of a
looming recession.

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Some of the biggest hits came from cryptocurrencies,
which surged early in the pandemic when record-low interest rates encouraged
investors to bid up the riskiest investments. Bitcoin plunged over 14% and fell
below $23,400, according to Coindesk. It’s back to where it was in late 2020
and down from a peak of $68,990 in November last year.