To The Moon

On Monday, all three major US stock indices gave up their intraday gains and closed in the red. The $S&P 500(.SPX)$ fell 1.2% and below 5,100 points, marking a 2.6% decline over two trading sessions - the steepest drop in more than a year.

Additionally, the $DJIA(.DJI)$ dipped 0.7%, and the $NASDAQ(.IXIC)$ tumbled 1.8%, with large-cap tech stocks taking the lead in the sell-off.

$Microsoft(MSFT)$ $Apple(AAPL)$ and $NVIDIA Corp(NVDA)$ were among the top losers in the interest rate-sensitive tech sector.

Almost all the stocks in the $NASDAQ 100(NDX)$ were in the red, with $Tesla Motors(TSLA)$ shares sliding about 5% after the electric car maker confirmed layoffs. Even $Salesforce.com(CRM)$ , the cloud giant rumored to be acquiring software provider Informatica, couldn't escape the red.

U.S. stocks on Monday extended last week's decline, fueled by speculation that the Fed might delay rate cuts or reduce the number of cuts this year. Meanwhile, the escalating situation in the Middle East continued to grab headlines.

Furthermore, US stock market volatility is on the rise, with one-month put option premiums touching their highest levels since last October. The $Cboe Volatility Index(VIX)$ , Wall Street's "fear gauge," hit its highest point this year.

Craig Johnson from Piper Sandler said:

The rally is starting to fade and fall back. Interest rates are expected to stay higher for longer, and investors are getting more cautious and tactical as earnings season rolls in.

Chris Larkin, a $Morgan Stanley(MS)$ 's E-Trade Financial said:

If the S&P 500 wants to avoid its first three-week losing streak since last September, investors need to forget about the worries that rate cuts will be delayed due to stubborn inflation.

In the short term, earnings performance in the first week of the reporting season will set the tone for the market, but geopolitical tensions in the Middle East still pose significant uncertainty.

Analysts from Jefferies, $JPMorgan Chase(JPM)$ , $Citigroup(C)$ , and State Street Bank all agree that strong economic data and corporate earnings are enough to drive the stock market's gains this year, regardless of whether rate cuts are delayed.

Strategy team led by Ohsung Kwon at $Bank of America(BAC)$ quipped that, compared to stagflation, high inflation rates driven by robust economic momentum might not be all bad for the US stock market.