Dow Jones Falls Nearly 500 Points as Investors Hedge Bets Against Economic Decline

US stock indices closed at a considerable loss on Monday, as investors struggle to make sense of contradictory market trends in the face of increasing fears a recession is on the horizon.

At closing bell on Monday, the Dow Jones Industrial Average had fallen by 482.78 points, a 1.40% decline to end at 33,947.10. The S&P 500 fell by 72.86 points, a 1.79% decline to finish at 3,998.84. The Nasdaq Composite declined by 1.93%, falling 221.56 points to close at 11,239.94.

According to market analysts, several trends are influencing investor behavior in strange ways. On the one hand, last week’s better-than-expected jobs report suggested the Federal Reserve’s effort to crack down on inflation hasn’t hurt the economy as badly as feared. In addition, last week was a good week for US markets, with the Dow gaining nearly 600 points from Monday to Friday.

However, Fed chair Jerome Powell also made comments last week suggesting that while the central bank might not increase interest rates so drastically this month, its final target rate could increase by at least 100 base points, to over 5%. Combined with wide-ranging predictions of a recession or recession-like economic performance in 2023, investors have become “really, really bearish,” as the Wall Street Journal put it on Monday, holding onto larger amounts of their assets in case debts suddenly come due.

The Federal Reserve Board of Governors is slated to meet later this week and deliver news about its latest interest rate hike, which will increase the amount of money banks are required to hold in their vaults instead of lending out to other banks overnight. The move is intended to slow down the flow of money and increase the value of the US dollar, which has seen historically high inflation for nearly a year, driving up the cost of basic commodities for American consumers.