Wall Street’s main indexes slipped for the third straight day on Monday led by declines in healthcare and energy stocks as investors worried that another massive interest rate hike by the Federal Reserve could tip the U.S. economy into a recession.
Five of the 11 S&P 500 sectors were down in early trading. Healthcare stocks fell 1.5%, weighed by a 5.5% drop in the shares of Moderna Inc.
The energy sector slipped 1% as oil prices declined, pressured by expectations of weaker global demand and by U.S. dollar strength.
The S&P 500 and the Nasdaq logged their worst weekly percentage drop since June on Friday as markets fully priced in at least a 75-basis-point rise in rates during the week, with Fed funds futures showing a 21% chance of a whopping 100 bps increase.
Unexpectedly hot August inflation data last week also raised bets on increased rate hikes down the road, with the terminal rate for U.S. fed funds now at 4.48%.
“Markets are going to be looking for direction until the Fed meeting, there won’t be much trading action till then,” said Christopher Grisanti, chief equity strategist at MAI Capital Management in Cleveland.
The S&P 500 has lost 19% so far this year on worries of a central bank-induced recession amid recent warnings of slowing demand from delivery firm FedEx and an inverted U.S. Treasury yield curve.