Dow drops 600 points as record inflation fuels Fed fears

By Ovunc Kutlu

ANKARA (AA) – The Dow Jones dropped over 600 points and US stocks opened lower on Monday as record high inflation fuels fears that the Federal Reserve could become more hawkish in rate hikes.

The blue-chip index was down 630 points, or 2%, to 30,762 at 9.50 a.m. EDT after posting last week its worst weekly performance since January.

The S&P 500 fell 97, or 2.5%, to 3,802 as it tested the bear market territory.

The tech-heavy Nasdaq plummeted 350 points, or 3.1%, to 10,988.

The VIX volatility index, also known as the fear index, soared 17.7% to 32.66 with investors' fears that the Fed's higher interest rates could cause recession in the US economy.

Although Fed officials are hoping for a soft landing – a process in which a central bank raises rates against high inflation and causes an economic slowdown but avoids a recession – its aggressive monetary tightening has caused turmoil in markets.

The dollar index rose 0.6% to 104.78 and the 10-year US Treasury yield jumped 3.8% to 3.278%.

Precious metals were down with gold losing 2.1% to $1,832 and silver falling 3.3% to $21.16.

Crude prices declined around 0.6%. Global oil benchmark Brent crude was trading at $121.20 for a 0.66% loss, while US benchmark West Texas Intermediate was at $119.92 – a 0.62% decrease.

After 25 and 50 basis points of rate hikes in March and May, respectively, the Fed is widely expected to hike rates another 50 basis points in each of its next meetings on Wednesday and in July.

Several Fed officials in recent weeks have also indicated that the central bank could make a 75-basis point rate hike in September to lower record inflation in more than 40 years.

US consumer inflation jumped 8.6% in May, compared to the same month a year ago, recording its highest annual increase since December 1981.