A brutal sell-off on Wall Street continues as stocks sink for a 3rd day in a row

By David Gura

Published May 9, 2022 at 5:49 PM EDT

Traders work on the floor of the New York Stock Exchange in New York City on Friday. Stocks slumped again on Monday as fears about inflation are proving hard to tamp down.

Updated May 9, 2022 at 6:40 PM ET

A sell-off on Wall Street keeps getting worse.

Stocks slumped for a third consecutive day as anxiety continues to build about inflation – and whether the Federal Reserve can bring prices down without sparking a recession.

The declines come before the Labor Department is set to report consumer prices data for April, which are expected to show price gains slowing somewhat, but not enough to meaningfully bring down inflation from 40-year highs.

Those inflation fears are coming at a time of deep uncertainty in markets, as investors assess the economic fallout from Russia's continued war in Ukraine. Wall Street is also concerned about the COVID-related lockdowns in China, which are raising new fears about global supply chains.

"Seismic activity in the stock market continues to intensify as all sizes and styles sink deeper into the red," said Sam Stovall, the chief investment strategist at CFRA.

On Monday, the Dow Jones Industrial Average slumped more than 600 points, or nearly 2%. The tech-heavy Nasdaq fell by 4.3%, while the S&P 500 fell more than 3% to its lowest levels in a year.

Gas prices are displayed at a station in Burbank, Calif., on April 27. Gas prices have surged along with other consumer goods, hurting pocketbooks across the country.

It's still all about inflation

Inflation fears have dominated trading in what has been a tough year in markets.

The Fed raised interest rates by half a percentage point last week, and Fed Chair Jerome Powell indicated more increases of a similar size are likely at the central bank's next two meetings.

The higher rates will raise borrowing costs across the economy. Mortgage rates have already spiked above 5% to their highest levels in years.

The Fed is trying to engineer a "soft landing," that is, slowing growth just enough to fight inflation without kickstarting a deep downturn.

But investors fear the Fed is moving too late to fight inflation, having first raised interest rates by a quarter percentage point in March.

On Monday, the declines were widespread, but technology companies continue to be among the hardest hit stocks.

Uber shares fell by 11.5%, after the ride-sharing company announced detailed cost-cutting measures.

The pain on Wall Street hasn't been confined to stocks. There has also been a sell-off in U.S. government bonds — which would see their returns erode in a period of high inflation.

And Bitcoin has dropped dramatically. The cryptocurrency is now trading below $32,000 — less than half of it's all-time high, set just six months ago.