Stocks closed broadly lower on Wall Street and Treasury yields rose Monday after surprisingly strong economic reports highlighted the Federal Reserve's difficult fight against inflation.
The S&P 500 fell 1.8 percent, its third straight drop. The slide more than offset the index's gains last week. The Dow Jones Industrial Average dropped 1.4 percent and the tech-heavy Nasdaq composite slid 1.9 percent. Small-company stocks fell even more, sending the Russell 2000 index 2.8 percent lower.
Bond yields mostly climbed. The yield on the 10-year Treasury, which influences mortgage rates, rose to 3.59 percent from 3.49 percent late Friday.
The selling came as traders reacted to some better-than-expected economic snapshots. The services sector, which makes up the biggest part of the U.S. economy, showed surprising growth in November, according to the Institute for Supply Management. Reports on business orders at U.S. factories and orders for durable goods in October also rose more than expected.
The reports are positive for the broader economy, but they make the Fed's fight against inflation more difficult because it likely means the central bank will have to keep raising interest rates in order to bring down inflation.
Wall Street will get a weekly update on unemployment claims on Thursday. Investors will likely be more focused on the monthly report on producer prices, for November, from the government Friday.
The Fed has been aggressively raising its benchmark interest rate in an effort to tame inflation. The strategy is intended to make borrowing more expensive and generally hit the brakes on consumer spending and the economy. The risk is that the policy could send the economy into a recession. The Fed is meeting next week and is expected to raise interest rates by a half-percentage point.