The Bear Market Descends

The fear is palpable.

At the Wall Street Journal, "Dow Drops Over 800 Points; S&P 500 Closes in Bear-Market Territory as Stocks Slide":

Investors raise bets on aggressive Federal Reserve interest-rate increases; cryptocurrencies decline.

The stock-market selloff deepened Monday, with the S&P 500 entering a bear market, as investors took another look at Friday’s red-hot inflation data and liked it even less.

Faced with rising chances of aggressive monetary tightening by the Federal Reserve, investors broadly unloaded risk. The S&P 500 slumped 3.9% as 495 of its 500 components ended the day lower. The declines left the U.S. stock benchmark down more than 20% from its January record, sending it into a bear market for the first time since 2020.

Meanwhile, a rout in cryptocurrencies highlighted investors’ increasing unwillingness to hang on to their most speculative holdings. The price of bitcoin plunged below $23,000 before paring that loss to trade at 5 p.m. ET down 66% from its November high.

The drop in cryptocurrencies accelerated Monday after interest-rate fears sparked a weekend selloff. Bitcoin, the biggest cryptocurrency, traded at 5 p.m. at $23,250.72, a drop of 15% from 24 hours earlier. Ethereum was down 16% from 24 hours earlier to about $1,243. Shares of Coinbase Global fell 11%, while Celsius Network said it was pausing all withdrawals, swaps between cryptocurrencies and transfers between accounts, citing “extreme market conditions.”

Even rare bets that have worked in 2022 stumbled Monday. The energy segment, the only one of the S&P 500’s 11 sectors in positive territory this year, fell 5.1%, a steeper decline than that of the broad index. The utilities group, the second-best performer in 2022, also lagged behind the market with a daily drop of 4.6%.

“We’re definitely seeing a risk-off atmosphere, a flight to quality,” said Charlie Ripley, senior investment strategist at Allianz Investment Management. “In that environment, people need to raise cash.”

The S&P 500 fell 151.23 points, or 3.9%, to 3749.63. The Dow Jones Industrial Average dropped 876.05 points, or 2.8%, to 30516.74. The tech-heavy Nasdaq Composite declined 530.80 points, or 4.7%, to 10809.23, off 33% from its November record.

Markets have swung wildly this year as investors scramble to decipher how rapidly the central bank will raise interest rates in an attempt to tame sky-high inflation. Rock-bottom rates and other stimulative policies helped keep the economy—as well as markets—afloat as the arrival of the Covid-19 pandemic idled businesses and threw people out of work.

Now, the Fed is trying to tame surging prices by unwinding that easy-money policy. The Fed will begin its latest two-day policy meeting Tuesday, and most investors believe that the central bank will announce Wednesday it is raising its benchmark interest rate by half a percentage point...

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