US Stocks Dramatically Cut Losses After Dow Jones Plummeted Over 1,000 Points

US stocks experienced a sharp decline on Monday as investors continued to part with assets that may be subject to forthcoming Federal Reserve policy changes. At one point, the Dow Jones Industrial Average lost more than 1,000 points, and the S&P 500 briefly entered into correction territory before rebounding later in the afternoon.

After hours of trading in red, US stocks made a comeback by Monday's close, with the S&P 500 finishing higher at 0.3%, and the Dow Jones Industrial Average seeing a 101-point (0.3%) increase. Monday broke a 6-day streak of losses for the S&P.

Tesla and chipmaker Nvidia both fell by over 4% in the S&P 500's tech sector. Moderna led the index's losses, dropping over 8%.

The tech stock sell-off appeared to bleed into the cryptocurrency markets, where Bitcoin dipped to less than $33,000, less than half of the cryptocurrency's November 2021 market value.

#Bitcoin reclaiming $34.2k is a positive development pic.twitter.com/LJo1EaMAMX

— Matthew Hyland (@MatthewHyland_) January 24, 2022

The market plunge has been attributed to investor fears that the US Federal Reserve will soon announce groundwork for an interest rate hike intended to combat surging inflation.

With inflation running at a 40-year high, the Federal Reserve is gearing to tighten monetary policy and will likely raise interest rates several times in 2022. The Federal Reserve chairman, Jerome Powell, is expected to signal a rise in interest rates following the Wednesday conclusion of the Fed's two-day meeting.

Americans could see rates rise as soon as March.

The CBOE Volatility Index (VIX), Wall Street's "fear gauge," reached its highest level since November 2020. CNBC noted that such a rise is typically followed by market snap-back, if only temporary.

White House Press Secretary Jen Psaki downplayed the plunge, telling reporters that the White House focuses on "trends in the economy, not any one day and any single indicator."

"Unlike his predecessor, the president does not look at the stock market as a means by which to judge the economy," Psaki said, taking a jab at former US President Donald Trump.

Jen Psaki uses Peter Doocy's question to throw show shade Trump's way and remind everybody that the stock market is up 15% since Biden took office, "We focus on the trends in the economy, not any one day and any single indicator, unlike his predecessor." pic.twitter.com/DaNJbLr8df

— Sarah Reese Jones (@PoliticusSarah) January 24, 2022

Investor insecurity has also been linked to Western fears of Russian forces invading Ukraine.

In recent days, the US State Department has instructed families of American diplomats to leave the country, and the White House is mulling the deployment of thousands of US troops already on "alert."

The Kremlin has repeatedly rejected accusations of a preplanned offensive operation against Kiev. Russian Foreign Ministry spokesperson Maria Zakharov noted that the US and other Western powers view Ukraine "as an instrument of influence" to destabilize the region.