Stock Market ‘Panic Is Setting In’ As S&P 500 Enters Correction Territory

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Topline

The stock market plunged again on Monday—continuing a brutal streak of losses—with the S&P 500 falling into correction territory as investors worry about rising interest rates and await a key policy meeting from the Federal Reserve later this week.

The benchmark index is now down more than 10% from its record highs earlier this month.

Richard Drew/ASSOCIATED PRESS

Key Facts

The Dow Jones Industrial Average fell 2.1%, around 700 points, while the S&P 500 lost 2.6% and the tech-heavy Nasdaq Composite 3.1%.

The benchmark S&P 500 index, which is on track for its worst January performance ever, is on pace to hit correction territory, down more than 10% from its record high at the start of 2022.

The CBOE Volatility Index (VIX), which measures market volatility, hit its highest level in nearly twelve months, surging over 37 on Monday morning.

Investors continue to remain concerned about surging interest rates and are now looking ahead to the Federal Reserve’s upcoming policy meeting, which wraps up on Wednesday.

Most experts don’t expect the Fed to take any significant actions at this meeting, but the central bank will likely set up the first of multiple interest rate hikes beginning in March while also concluding its monthly bond purchase program.

What’s more, the fourth quarter earnings season has so far been mixed: Although more than 74% of S&P 500 companies that have reported results topped Wall Street estimates, some big names including Netflix and Goldman Sachs saw lackluster earnings.

What To Watch For:

Shares of big tech companies, which have remained under pressure in recent weeks, continued to fall on Monday. Shares of Netflix were down another 8%, after plunging more than 20% last Friday on the back of disappointing quarterly earnings. Other big names including Microsoft and Apple, which both report earnings this week, also declined on Monday. Electric vehicle maker Tesla, meanwhile, fell over around 6%.

Surprising Fact:

Both the Dow and S&P 500 are on pace for their worst month since March 2020, when the U.S. economy fell into a recession during coronavirus pandemic shutdowns. The Nasdaq, meanwhile, is down nearly 15% in January, which would be its worst month since the financial crisis in October 2008.

Crucial Quote:

“Stocks are being slaughtered, and panic is setting in,” says Vital Knowledge founder Adam Crisafulli in a recent note. “What had initially been a stimulus withdrawal-driven decline morphed last week to include earnings jitters.”

Key Background:

Monday’s losses follow what has already been a brutal sell-off on Wall Street this month. With tech stocks under huge selling pressure, the Nasdaq was the first index to hit correction territory last week, now down around 15% from its record highs last November.