US stocks were significantly lower early Monday after all three major indexes posted their worst week in three months.
The S&P 500, the Dow Jones Industrial Average and the tech-heavy Nasdaq were each down about 0.6% at the start of the trading session.
In the bond market, the benchmark 10-year US Treasury rose to 3.49%, its highest level since 2011, while the 2-year Treasury bills surpassed a 15-year high of 3.9%.
Investors are gearing up for the two-day Federal Reserve meeting on September 20-21. The Federal Reserve is expected to deliver a third straight hike of 75 basis points after talks conclude at 2pm on Wednesday
Higher-than-expected inflation data last week prompted a sell-off in US stock markets after renewed fears that the Fed would step up the scale of its monetary tightening effort and plunge the economy into recession. The benchmark S&P 500 fell 4.7% this week, the Dow Jones Industrial Average fell 4.1% and the tech-heavy Nasdaq Composite fell 5.5%.
A pre-profit warning from shipping giant FedEx (FDX) on Friday also exacerbated growth concerns after the company said a global recession may be underway and withdrew its full-year forecast on macroeconomic trends that “have deteriorated significantly.”
Of the S&P 500 companies that held earnings calls from June 15 through September 8, 240 cited the term “recession” — the highest number to cite the term since at least 2010, and well above the 5-year moving average of 52, according to data from FactSet research.
As investors race into earnings season, Wall Street strategists are sounding the alarm on earnings expectations, with macroeconomic headwinds, including inflation and interest rate pressures, increasingly showing signs that corporate margins are being squeezed.
Bank of America’s Michael Hartnett warned in a recent note that earnings cuts will be the catalyst for a deeper sell-off, and sees the S&P 500 tumbling towards 3,600 – and even 3,000 in a bear case. At the close on Friday, the index was at 3873.33.
As Fed worries kept investors in a risk-off mood, sentiment was felt in cryptocurrency markets as well. Bitcoin (BTC-USD) fell below $19,000 and Ethereum (ETH-USD) slipped near $1,300 after its much-anticipated “merger” last week.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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