Stocks deepened a late August skid with more losses Tuesday, as Wall Street grapples with the prospect that high interest rates are here to stay until the Federal Reserve brings down inflation.
The S&P 500 fell 1.1%, bringing its loss in the past three days to 5.1%. The benchmark index is down 3.5% for the month.
The Dow Jones Industrial Average dropped 1%, while the Nasdaq composite lost 1.1%. Smaller company stocks also fell, dragging the Russell 2000 1.5% lower.
Markets have been weaker since Fed Chairman Jerome Powell indicated this past Friday that the central bank will stick to its strategy of raising interest rates in an attempt to tame the hottest inflation in four decades.
The latest wave of selling reflects a "hangover" from Powell's speech last week and uncertainty ahead of the Labor Department's monthly employment report on Friday, said Megan Horneman, chief investment officer at Verdence Capital Advisors.
Markets are trying to get a better sense of "how far, how fast the Fed's going to have to go" in slowing down the economy to fight inflation, she said.
A strong report on the job market Tuesday morning further diminished any hopes that the Fed would be able to ease up on its inflation-fighting policy. The higher rates the Fed is imposing are meant to keep inflation in check by slowing down the economy, including the pace of hiring.
The government reported that there were were 11.2 million open jobs on the last day of July. That's nearly two jobs for every unemployed person, on average. That number was up from a revised 11 million in June.
"Employers will have to increase their incentives to fill jobs, which could be inflationary," said Sam Stovall, chief investment strategist at CFRA. "We're not seeing numbers that are consistently offering encouragement."
Wall Street is worried that the Fed could hit the brakes too hard on an already slowing economy and veer it into a recession. Higher interest rates also hurt investment prices, especially for pricier stocks.
The central bank has already raised interest rates four times this year and is expected to raise short-term rates by another 0.75 percentage points at its next meeting in September, according to CME Group.
Wall Street selling was widespread Tuesday, with all the sectors in the S&P 500 ending in the red.
All told, the S&P 500 fell 44.45 points to 3,986.16. The Dow dropped 308.12 points to 31,790.87, and the Nasdaq fell 134.53 points to 11,883.14. The Russell 2000 gave up 27.35 points to close at 1,855.59.
Major indexes had gained ground in July and into early August on hopes that weaker economic data would prompt the Fed to ease up on its high interest rate policy. Those gains followed a weak first half of the year when the S&P 500 dropped 20% from its most recent high and entered a bear market.
Investors have been closely watching economic data for any additional signs that the economy is slowing down or that inflation may be cooling, or at least holding at its current level. Businesses and consumers have been hit hard by rising prices on everything from food to clothing, but recent declines in fuel prices have provided some relief.
Consumers regained some confidence in August, according to a survey from The Conference Board. Its consumer confidence index rose this month after three straight monthly declines. It also rose well above what economists expected.
Technology stocks were among the biggest weights on trading Tuesday. Chipmaker Nvidia Corp. fell 2.1%.
Energy stocks fell along with U.S. crude oil prices, which dropped 5.5% to settle at $91.64 a barrel. Chevron Corp. dropped 2.4%.
While the price of U.S. crude is up more than 43% this year, it has fallen nearly 5% this month.
"The biggest challenge with oil is the fact that the Fed has basically said they're going to produce economic pain to try and bring down inflation, and typically when you have an economic slowdown or recession, you're going to get energy prices that will fall," Verdence Capital Advisors' Horneman said.
Best Buy Co. Inc. was a bright spot Tuesday, gaining 1.6% after reporting results for its latest quarter that were much better than analysts were expecting.
The yield on the 10-year Treasury held steady at 3.11%.