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Wall Street slid deeper into a bear market on Monday, with the S&P 500 and Dow closing lower as investors fretted that the Federal Reserve’s aggressive campaign against inflation could throw the U.S. economy into a sharp downturn. The Canadian benchmark index logged its fifth straight daily loss and ended at its lowest level in a year and a half. Bond yields continued to spike and the Canadian dollar fell sharply once again to fresh two-year lows.

After two weeks of mostly steady losses on the U.S. stock market, the Dow Jones Industrial Average confirmed it has been in a bear market since early January. The S&P 500 index confirmed in June it was in a bear market, and on Monday it ended the session below its mid-June closing low, extending this year’s overall selloff.

With the Fed signaling last Wednesday that high interest rates could last through 2023, the S&P 500 has relinquished the last of its gains made in a summer rally.

“Investors are just throwing in the towel,” said Jake Dollarhide, Chief Executive Officer of Longbow Asset Management in Tulsa, Oklahoma. “It’s the uncertainty about the high-water mark for the Fed funds rate. Is it 4.6%, is it 5%? Is it sometime in 2023?”

Confidence among stock traders was also shaken by dramatic moves in the global foreign exchange market as sterling hit an all-time low on worries that the new British government’s fiscal plan released Friday threatened to stretch the country’s finances.

That added an extra layer of volatility to markets, where investors are worried about a global recession amid decades-high inflation. The CBOE Volatility index, hovered near three-month highs.

The Dow is now down 20.5% from its record high close on Jan. 4. According to a widely used definition, ending the session down 20% or more from its record high close confirms the Dow has been in a bear market since hitting its January peak.

The S&P 500 has yet to drop below its intra-day low on June 17. It is down about 23% so far in 2022.

U.S. Treasury yields hit fresh highs on Monday, rising in tandem with euro zone and British government debt yields amid concerns that central banks globally will keep tightening monetary policy to curb stubbornly high inflation.

Two-year Treasury yields, which tend to be more sensitive to interest rate changes, rose to a fresh 15-year high of 4.312%, and benchmark 10-year note yields rose nearly 20 basis points from their Friday close, climbing to an intra-day high of 3.9%, the highest since April 2010.

Canadian bond yields were also higher across the yield curve, with the closely followed five-year government bond - influential in the setting of fixed mortgage rates and guaranteed investment certificates - hitting a high of 3.444%, up about 14 basis points. That’s nearing the 14-year high of 3.61% hit this past June.

The U.S. dollar continued to charge ahead, and in its wake, the Canadian dollar tumbled to its lowest level in more than two years. The loonie was trading 1.1% lower at 1.3740 to the greenback, or 72.78 U.S. cents, after touching its weakest level since May 2020 at 1.3808.

“Given the huge increase in yields in North America and Europe, there is a growing sense that recession might be coming to North America as well as Europe,” said Michael Goshko, senior market analyst at Convera Canada ULC.

“That kind of situation is never going to be good for the Canadian dollar.”

Canada’s S&P/TSX Composite Index closed down 153.94 points, or 0.83%, at 18,327.04 - the lowest since March 4, 2021.

The economically-sensitive energy sector was once again ground zero for a lot of the selling, losing about 3%. Oil prices fell $2 a barrel, settling at nine-month lows in choppy trade, pressured by a strengthening U.S. U.S. West Texas Intermediate crude for November delivery dropped to US$76.71, the lowest since Jan. 6.

Bank of Nova Scotia shares fell 2.8% after the company said it appointed Scott Thomson, a board member for six years, to succeed Chief Executive Officer Brian Porter. That’s a move that came as a surprise due to the new CEO’s lack of familiarity among bank investors.

The TSX materials group, which includes precious and base metals miners and fertilizer companies, lost 1.3% as gold and copper prices fell.

The Dow Jones Industrial Average fell 1.11% to end at 29,260.81 points, while the S&P 500 lost 1.03% to 3,655.04. The Nasdaq Composite dropped 0.6% to 10,802.92.

Ten of 11 S&P 500s sector indexes fell, led by 2.6% drops in real estate and energy.

Gains in Amazon and Costco Wholesale Corp helped limit losses in the Nasdaq.

Shares of casino operators Wynn Resorts, Las Vegas Sands Corp and Melco Resorts & Entertainment jumped between 11.8% and 25.5% after Macau planned to open to mainland Chinese tour groups in November for the first time in almost three years.

Volume on U.S. exchanges was 11.9 billion shares, compared with the 11.2 billion average for the full session over the last 20 trading days. Declining issues outnumbered advancing ones on the NYSE by a 5.37-to-1 ratio; on Nasdaq, a 2.31-to-1 ratio favored decliners. The S&P 500 posted no new 52-week highs and 120 new lows; the Nasdaq Composite recorded 16 new highs and 594 new lows.

Reuters, Globe staff

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