Dow plunges 900 points, S&P enters bear market as inflation fears mount

Americans typically drive more starting around Memorial Day, so demand is up. Global oil prices are rising, compounded by sanctions against Russia, a leading oil producer, because of its war against Ukraine. And there are limits on refining capacity in the United States because some refineries shut down during the pandemic.

Federal Reserve officials are scheduled to meet this week for their policy meeting, and investors expect them to raise interest rates at least half a percentage point in a bid to rein in inflation. Some Wall Street analysts think the pace of monetary tightening is likely to tip the economy into a recession.

"With the recent inflation data providing no 'clear and convincing evidence' that inflationary pressures will recede without stronger policy actions, the challenge for monetary policymakers of guiding inflation back to target without depressing demand to the point of triggering a recession has gotten that much more difficult," analysts with Deutsche Bank told investors in a research note.

"In our view, achieving such a 'soft landing' looks very unlikely given the degree of monetary tightening needed to combat the seemingly endless stream of inflationary shocks and rising inflation expectations," they added."It's still too early to say a recession is definitely coming in the U.S., but a 'hard landing' seems very hard to avoid at this point given the way inflation is still rising," the chief market analyst said.

Mark Haefele, chief investment officer of global wealth management at UBS, has a more benign view. He still expects inflation to dip later this year, noting that the price of products like smartphones and TVs have started to decline. He notes that so-called core inflation, which excludes volatile food and energy prices, declined slightly in May even as the broader Consumer Price Index rose.

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