S&P 500 notches new closing low for 2022, Dow falls into bear market as dollar surges

Pro Picks: Watch all of Monday's big stock calls on CNBC
Pro Picks: Watch all of Monday's big stock calls on CNBC

The S&P 500 notched a new closing low for 2022 and the Dow Jones Industrial Average slipped into a bear market as interest rates surged and turmoil rocked global currencies.

The S&P 500 declined 1.03% to 3,655.04, falling below the June closing low of 3,666.77. At one point during the day, the index dipped to 3,644.76, less than eight points away from its intraday low of 2022: 3,636.87.

The Dow dropped 329.60 points, or 1.11%, to 29,260.81 — accelerating losses in the final moments of trading. The 30-stock index is down about 20.4% from its Jan. 4 closing high. The Nasdaq Composite fell 0.6% to 10,802.92.

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The British pound dropped to a record low on Monday against the U.S. dollar, falling 4% at one point to an all-time low of $1.0382. The pound has since come off its worst levels on speculation that the Bank of England may have to raise rates more aggressively to tamp down inflation.

The Federal Reserve's aggressive hiking campaign, coupled with the U.K.'s tax cuts announced last week has caused the U.S. dollar to surge. The euro hit the lowest versus the dollar since 2002. A surging greenback can hurt the profits of U.S. multinationals and also wreak havoc on global trade, with so much of it transacted in dollars.

"Such U.S. dollar strength has historically led to some kind of financial/economic crisis," wrote Morgan Stanley's Michael Wilson, chief U.S. equity strategist, in a note. "If there was ever a time to be on the lookout for something to break, this would be it."

Bond yields leapt on Monday, with the 10-year Treasury yield topping 3.9% at one point during the day. That marks its highest level since 2010.

The yield also jumped on the 2-year Treasury, which is especially sensitive toward Fed policy. The rate on the note surpassed 4.3%, the highest level since 2007.

Lea la cobertura del mercado de hoy en español aquí.

West Texas Intermediate crude settles at lowest level since January

West Texas Intermediate crude, the benchmark for U.S. oil, ended the day at $76.71, slipping 2.58%. It's the lowest settle for the commodity since Jan. 3.

Brent crude slipped 2.43% to settle at $86.06. Earlier, it traded as low as $83.81, the lowest level since Jan. 13.

Oil prices ran up earlier in the year, fueled by Russia's invasion of Ukraine, but recent declines for the commodity have sharply trimmed its gains for 2022. WTI is up only 1.99% for the year, while Brent is up 8.07%.

-Darla Mercado, Gina Francolla

Match Group, Organon trade at all-time lows

Match Group, the parent company of some of the world's best-known online dating platforms, is trading at its lowest level since the company went public in 2015.

The company behind services such as Tinder, Hinge, OkCupid and first went public via an initial public offering. It now trades as part of the Nasdaq under the ticker MTCH.

Match Group was trading down about 1.2% Monday at $46.75. Shares traded as low as $46.19 — marking its lowest valuation since becoming a publicly traded company.

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Pharmaceutical company Organon is similarly trading at its lowest since it spun off from Merck in June 2021.

The two companies are among the more than 100 stocks in the S&P 500 trading down to levels not seen in a year or longer. Those stocks span industries including telecommunication, financial services, shipping, technology and real estate.

— Alex Harring, Chris Hayes

Strong dollar is a headwind for U.S. stocks but a tailwind overseas, GMO says

Grantham, Mayo and Van Otterloo in a letter to clients says that the dollar's at "its highest valuation versus other major developed currencies in more than 35 years – and it's our problem."

The report, written by GMO partner Ben Inker, uses a Bank for International Settlements index measuring the dollar's real effective exchange rate, in other words adjusted for inflation.

Unfortunately for the U.S., "an overvalued currency is a negative influence on the performance of equities in that country," and "today's combination of cheaper stocks and cheaper currencies outside the U.S. seems a promising backdrop for a reversal of the U.S. equity dominance of the last decade," Inker writes.

GMO has long predicted better performance someday coming from emerging markets, but this latest currency realignment makes GMO seemingly more positive on developed economies' markets too.

"A cheap currency is a strong equity tailwind in the developed world, leaving developed markets like the Euro area and Japan poised to benefit from their undervalued currencies," Inker says. In developing markets, meanwhile, "the valuation of currencies in the emerging world today are attractive enough that even allowing for some poor [policy] decision making, they should still be a source of equity market support over the next few years."

— Scott Schnipper

U.S. oil tumbles to the lowest level since Jan. 4

Oil accelerated recent losses on Monday, falling once again after posting four straight losing weeks. West Texas Intermediate crude, the U.S. oil benchmark, hit a session low of $76.49 per barrel, a price last seen on January 4. The contract recovered slightly ahead of the close, ending the day at $76.71, for a loss of 2.58%.

For the year it's now up less than 2%.

Global benchmark Brent crude slid 2.4% on Monday, ending the day at $84.06 per barrel. The losses were thanks in part to the strengthening dollar, which makes oil more expensive for foreign buyers.

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— Pippa Stevens

Citi's Scott Chronert says earnings resilience will continue in the third quarter

Citi's Scott Chronert said he expects corporate earnings will remain resilient during the third-quarter reporting period.

"[We] will be watching our 3650 level this week," Chronert wrote in a Sunday note, referring to the firm's recession scenario level for the S&P 500. "Whether it holds or not, our base view is that earnings resilience will continue during the Q3 reporting period. We don't see a specific macro catalyst in the immediate future."

Given the current poor sentiment in markets, Chronert wrote he expects a rally in the fourth quarter for the broader market index to hit the firm's 4200 year end target, according to the note. Investors should buy information technology stocks, recently upgraded to overweight from underweight, as well as shares of health care and materials companies, the note read.

"In total, we are shifting further towards a style preference for Growth," Chronert wrote.

A recession in the first half of 2023 remains the firm's base case.

— Sarah Min

Treasury yields rising at rapid clip

Treasury yields are rising at a rapid clip, as global rates jump and investors anticipate a more aggressive Federal Reserve.

The benchmark U.S. 10-year yield rose above 3.9% for the first time since 2010. It was at about 3.75% on Friday. The 2-year yield Monday rose by about 13 basis points to 4.33%. A basis point equals 0.01 of a percentage point.

The U.K. 10-year gilt yield was at 4.24%. It was at 3.15% just a week ago.

Bond yields move opposite price. A sharp sell-off in U.K. bonds led the selling, as investors weigh the Bank of England's potential response to a U.K. government plan to cut taxes and raise spending. The pound fell to an all-time low against the dollar, as U.K. rates jumped Monday.

The Fed sent shockwaves across global rates markets Wednesday with a more aggressive forecast for interest rate hikes. "I think there's three things" moving the market, said AmeriVet's Greg Faranello. "It's the repricing of the Fed. It's the global rates story, and it's a function of liquidity," he said.

Andy Brenner of National Alliance said he sees no signs of support in the chart of the 10-year yield until 4%.

"This could also be the bond vigilantes seeing nothing to stop them," said Brenner.

--Patti Domm

Bank stocks underperform, Goldman falls more than 2%

The conventional wisdom that higher rates are good for bank stocks has been a losing bet for investors this year, and it is no different on Monday.

Shares of Goldman Sachs dropped 2.3%, making the investment bank one of the worst performers in the Dow. JPMorgan and Morgan Stanley each dropped nearly 2%, while Citigroup sank 3%.

Non-bank financials are also taking it on the chin. American Express fell 2%, while insurance stock Travelers shed 3%.

— Jesse Pound

Stocks making the biggest moves midday: Wynn, AMC, Lyft and more

Here are some of the stocks making the biggest moves midday Monday:

Las Vegas SandsWynn Resorts — Shares of the casino operators both soared about 11% after Macao announced its plan to allow Chinese tour groups back in the casinos as soon as November.

Li AutoXpeng — The Chinese electric vehicle makers saw shares jump up after Beijing announced an extension of tax breaks on electric vehicles.

AMC Entertainment — The movie theater giant and meme-stock favorite slumped 8% following news that AMC would likely sell up to 425 million units of APE, which is its preferred shares.

Lyft – Shares of the ride hailing company fell about 3% after UBS downgraded the stock to neutral from a buy.

Check out the full list of midday movers here.

— Alex Harring

JPMorgan's Kolanovic says a market bottom could be close

JPMorgan's Marko Kolanovic believes the market could be close to a bottom after the Fed-triggered sell-off pushed stocks into "very oversold" conditions.

"While the market has now settled into a view that Fed will continue with outsized hikes, we don't believe one should keep extrapolating the hawkish policy stance direction," the bank's chief global markets strategist said in a Monday note.

Kolanovic, one of the biggest bulls on Wall Street, said he's seeing some encouraging signs on the inflation front. Still, he noted that volatility will likely stay elevated until the next set of inflation reports.

"Some pre-conditions for a market bottom are falling into place: stocks are looking increasingly cheap and approaching deep-value outside of the US, and positioning is extremely depressed," Kolanovic said.

— Yun Li

Real estate and utilities are the biggest laggards in the S&P 500

Real estate and utilities were the two biggest laggards in the S&P 500 during Monday trading, with the sectors down 3.1% and 2.5%.

Shares of real estate companies Ventas and Kimco Realty were the two worst performing stocks in the broader market index, falling 5% and 4.8%.

Utilities companies AES and First Energy declined 4.5% and 3.3% each.

— Sarah Min

Pound comes off lows after Bank of England hints at rate action

The British pound, whose weakness had been weighing on stocks for much of Monday's session, came off its lows after the Bank of England signaled an aggressive approach to controlling inflation.

In a statement released late-morning New York time, the central bank's Monetary Policy Committee stopped short of an intermeeting interest rate hike. But it said it will "make a full assessment" of the pound's fall "and act accordingly" at its next gathering.

"The MPC will not hesitate to change interest rates by as much as needed to return inflation to the 2% target sustainably in the medium term, in line with its remit," the statement said.

As the market digested the remarks, the pound rebounded to nearly $1.07 against the U.S. dollar after falling as low as $1.04 earlier. A stronger dollar can hit U.S. stocks as it raises costs for multinational companies.

—Jeff Cox

Consumer discretionary, tech sectors lend support to the market

Shares of consumer discretionary and tech companies helped curtail losses in the S&P 500 in morning trading.

The consumer discretionary sector added 1.8% around 10:15 a.m., propelled by gains in Wynn Resorts and Las Vegas Sands. Shares of the casino names were up by double digits after news that China would allow group tours in Macau, easing Covid travel restrictions.

The tech sector also jumped 1.3%, driven by Enphase Energy and Ceridian. Shares of both companies were up more than 2%.

The S&P 500 ticked up by 0.5% in volatile trading.

­-Darla Mercado

Fed's Collins cites need for 'clear and convincing signs' that inflation is falling

Boston Federal Reserve President Susan Collins said Monday she will need to see concrete evidence that inflation is slowing before easing up on interest rate increases.

"Returning inflation to target will require further tightening of monetary policy," Collins said in prepared remarks. "It will be important to see clear and convincing signs that inflation is falling, and I will continue to assess the range of incoming data, both quantitative and qualitative, as inputs to my future policy determinations."

The Fed last week approved its third consecutive 0.75 percentage point interest rate hike in an effort to quell inflation running near its fastest pace since the early 1980s. Markets are expecting to see another hike of similar proportions at the next meeting in early November.

Echoing comments Sunday from Atlanta Fed President Raphael Bostic, Collins thinks the Fed can pursue its inflation-fighting policy without sinking the economy.

"There are reasons to be somewhat more optimistic about the ability to achieve the necessary slowing of demand without leading to a significant downturn, this time around," she said. "Household and business balance sheets are considerably stronger than in previous tightening cycles, reducing the risk of a significant retrenchment in spending and investment as interest rates rise."

Other Fed speakers on tap Monday include Bostic, Dallas Fed President Lorie Logan and Cleveland's Loretta Mester.

—Jeff Cox

Powell owes "American people an apology," Siegel says

The dollar is showing how tight the Fed actually is, says Wharton's Jeremy Siegel
The dollar is showing how tight the Fed actually is, says Wharton's Jeremy Siegel

Wharton professor Jeremy Siegel criticized the Federal Reserve on Monday, saying that the central bank was "talking way too tough" on inflation now after being too slow to pivot to tighter policy earlier in the cycle.

"Honestly, I think Chairman Powell should offer the American people an apology for such poor monetary policy that he has pursued, and the Fed has pursued, over the past few years," Siegel said.

Siegel said that he thinks the Fed is now at risk of causing a recession because it is not allowing the rate hikes it has already implemented to work their way into inflation data. The professor added that worker wages appear to be a "catch up" rather than a driver of inflation.

— Jesse Pound

Fed's Bostic says he doesn't expect 'deep, deep pain' for the economy

Atlanta Federal Reserve President Raphael Bostic is holding out hope that the central bank can bring down runaway inflation without killing the economy.

In an interview Sunday with CBS' "Face the Nation," Bostic acknowledged that raising interest rates will slow the economy and likely cause job losses. But he doesn't think that means the economy will sink into a deep recession.

"We need to have slow down. There's no question about that," he told host Margaret Brennan. "But I do think that we're going to do all that we can at the Federal Reserve to avoid deep, deep pain. And I think there are some scenarios where that's likely to happen."

Fed Chairman Jerome Powell last month said he expects "some pain" to coincide with the central bank's tightening efforts, which have included five interest rate hikes this year totaling 3 percentage points.

—Jeff Cox

CFRA's Sam Stovall says the S&P 500 is ready for a relief rally

CFRA's Sam Stovall says the S&P 500 is ready for a relief rally after Friday's moves pointed to oversold conditions.

"[Whenever] the S&P Composite 1500, which consists of the S&P 500, MidCap 400, and SmallCap 600 Indices, experienced a near total absence of its sub-industries trading above both their 10-week (50-day) and 40-week (200-day) moving averages, as was the case on Friday, June 17, the low for the decline had been set," CFRA's Sam Stovall wrote in a Monday note.

On Friday, none of the sub-industries were above their 10-week average and only 7% were higher than their 40-week average, or "exactly the same levels" as on June 17, according to the note.

"With the 10- and 40-week breadth indicators now again at levels that traditionally indicated a very oversold condition, CFRA thinks the S&P 500 and its constituent sectors and subindustries are ripe for a relief rally. The only question is whether the rally will have legs or get sold into," Stovall wrote.

— Sarah Min

Sell-off for the pound, British debt hitting key historical levels

The big moves in the UK currency and bond markets may be reaching technical oversold levels, according to Peter Boockvar of Bleakley Advisory Group.

"The dramatic plunge in the pound and Gilts is unbelievable and to the point where at least the pound is likely a buy. The 14 day [Relative Strength Index] is down to just 15 and the 7 day is at just 8. The 14 day is matching the lowest since March 2020 and January 2016 before that which was a few months before the Brexit vote," Boockvar wrote in a note on Monday.

The latest moves come after the British government announced a new mini-budget that includes tax cuts and additional spending, but those moves could prove to smart long-term, Boockvar said.

"I get the budget blowout of very expensive energy subsidies at the same time taxes will be cut across the board (preventing the corporate rate from going up, cutting the high top tax rate, reducing the stamp tax, eliminating the bonus cap for bankers, etc...) but these are all steps that will make the UK very long term competitive which would in turn invite a lot of investment," Boockvar wrote.

— Jesse Pound

These are Monday’s biggest analyst calls

Here are the biggest calls on Wall Street on Monday.

  • Planet Fitness — Shares jumped 4.2% in Monday premarket trading after Raymond James upgraded the fitness center company to strong buy from market perform, saying Planet Fitness is in great shape after a drawdown.
  • Lyft — The ride-hailing stock declined 3.9% in the premarket after UBS downgraded Lyft to neutral from buy, saying it's skeptical that Lyft can deliver growth.

Read more analyst calls here.

— Yun Li, Sarah Min

WTI falls to lowest point since January

West Texas Intermediate futures fell to 77.21 on Monday, or its lowest level since early January. The WTI has advanced only 3.4% this year after closing at 75.21 on Dec 31, 2021.

Brent crude declined to below $85 a barrel on Monday. Brent futures for November hit a low of 84.51, or its lowest point since mid-January when it traded at 83.99.

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— Sarah Min

VIX jumps to highest level since June

The Cboe Volatility Index, known as the VIX, jumped nearly 3 points to 32.70 on Monday, hitting its highest level since mid-June. The VIX looks at prices of options on the S&P 500 to track the level of fear on Wall Street.

The jump in VIX came as the sell-off in the stock market is set to deepen with S&P 500 futures falling 0.8% in premarket trading.

— Yun Li

European markets choppy; sterling slumps against the dollar

European stocks were choppy on Monday as investors continued to weigh the deteriorating economic outlook in the region.

The pan-European Stoxx 600 was down 0.2% by mid-morning in London, having recouped opening losses of roughly 0.6% before pulling back again. Utilities dropped 1.7% while tech stocks added 1.7%.

The British pound plunged to a record low on Monday, following last week's announcement by the new U.K. government that it would implement tax cuts and investment incentives to boost growth.

- Elliot Smith

British pound drops to record low

The sterling fell to a record low in Asia's morning, briefly shedding more than 4% to $1.0382.

It later recovered slightly to $1.0513.

The dollar index — which trades against a basket of six currencies including the euro, yen and sterling — gained about 1%.

— Abigail Ng

U.S. Treasury yields jump as Asian markets tumble, 2-year Treasury hits 4.3%

Yields on the U.S. 2-year Treasury note climbed further to briefly mark 4.3%, after reaching new 15-year highs late last week following the Federal Reserve's latest rate hike.

The 2-year Treasury was last trading at 4.2865%, while the 5-year Treasury also inched up to 4.0678%.

Yields and prices move in opposite directions, with one basis point equaling 0.01%.

The 10-year Treasury moved up to trade at 3.7607%.

—Jihye Lee

CNBC Pro: Asset manager says one FAANG stock looks 'very attractive' in the medium term

One Big Tech stock looks "very attractive" in the medium term, according to Neil Veitch, investment director at SVM Asset Management.

He told CNBC Pro Talks that the stock is his favorite among the FAANG stocks — a grouping which includes Facebook-parent MetaAmazonAppleNetflix and Google-parent Alphabet.

CNBC Pro subscribers can read more here.

— Weizhen Tan

Stocks prepare to test their lows in the final week of trading for September

Heading into the final week of trading for September, the Dow and S&P 500 are each down about 6% for the month, while the Nasdaq has lost 8%.

Both the Dow and S&P are now sitting 1.2% and 1.6%, respectively, above their lows from mid-June. The Nasdaq is 2.9% above its low.

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— Tanaya Macheel

Fear often leads to short-term bottoms, says Truist's Lerner

Investors are mentally preparing to see the S&P 500 test its low of the year, and that could mean a shorter-term bottom, according to Truist's chief market strategist Keith Lerner.

"The increased probability of breaking the June S&P 500 price low may be what it takes to invoke even deeper fear," Lerner said in a note. "Fear often leads to short-term bottoms. Importantly, as we saw in June, even if the market overshoots, snapbacks can be sharp and hard to time."

He added that with extreme selling having already taken place and stocks being oversold, it's not the time to press a negative view.

"In August, we had been advocating to reduce equities in the 4200-4300 range for the S&P 500 and a continued focus on increasing quality in portfolios," he said. "In our view, the challenging macro environment is here to stay. This is not the time to be on offense. However, it doesn't make sense to pile on to the negativity in the short term and become even more defensive after a large selloff has already occurred."

— Tanaya Macheel

Futures open lower in pre-market trading

Stock futures opened little changed on Sunday evening after the major averages suffered steep losses in the previous week, as Federal Reserve policy, surging interest rates and foreign currency turmoil spooked investors.

Futures tied to the Dow Jones Industrial Average were down by just 40 points, while S&P 500 futures and Nasdaq 100 futures fell 0.1%. Futures tied to all three of the major averages quickly fell much lower soon after premarket trading began.

— Tanaya Macheel