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Updated at 11:28 am EST

U.S. stocks slumped lower Monday, while the dollar soared and oil prices retreated sharply, as investors pulled back from risk markets amid a renewal of Covid restrictions in China and concerns over the impact on consumer demand from the Federal Reserve’s hawkish inflation stance.

Officials in China ordered millions of residents in the capital of Beijing for mandatory testing over the weekend as infections spread deeply into the city of 20 million amid the country’s ongoing Coivd resurgence. In Shanghai, city officials tightened their lockdown rules as restrictions headed into a fourth week in China’s biggest metropolitan area.

Stocks in the region were hammered as a result, with the Shanghai Composite falling 5.15%, the biggest single-day decline in more than two years, and the region-wide MSCI ex-Japan index tumbling 2.4% into the close of trading.

European stocks fell 1.8% by the close of Frankfurt trading, with markets getting very little lift from a decisive win for Emmanuel Macron in the second round of France’s Presidential elections.

The moves compounded investor concerns, already evident in last week’s U.S. market sell-off, which hived 5% from the S&P 500 over a two-day peak-to-trough period, that the Fed’s aggressive rate signaling will hit consumer demand sharply over the second half of the year, as bets on a 50 basis point rate hike at the next three policy meetings continue to accelerate.

To hammer home that point, last week saw the largest weekly outflow of equity market funds — $17.5 billion — so far this year, according to Bank of America data.

Stocks Slump on China Covid, Rate Worries, Twitter May Talk to Musk, Tesla, AT&T and Week Ahead In Focus – 5 Things To KnowAs a result, benchmark 10-year note yields fell to 2.787% in News York trading as investors ran for cover into risk-free markets, taking the U.S. dollar index, which tracks the greenback against a basket of six global currencies, 0.43% higher to a fresh two year high of 101.685.

Scroll to ContinueTheStreet RecommendsMARKETSTSLATWTRTesla Stock Slides As Traders Discount Elon Musk’s Potential $43 Billion Twitter Takeover2 hours agoCRYPTOCURRENCYCOINCrypto Column: Prices Mixed as Stocks Slump Over Fed-Policy Concern25 minutes agoTECHNOLOGYTWTRTSLARIP Twitter Trends as Reports Suggest Musk Deal Will Be Accepted54 minutes agoThe moves come ahead of the busiest busiest slate of the first quarter earnings season this week, with nearly 180 S&P 500 companies updating on March quarter profits ahead for the first look for GDP growth in the world’s largest economy on Thursday.

Microsoft  (MSFT) – Get Microsoft Corporation Report Google  (GOOGL) – Get Alphabet Inc. Class A Report, Meta Platforms  (FB) – Get Meta Platforms Inc. Class A Report and Apple  (AAPL) – Get Apple Inc. Report, the four largest weights to the S&P 500, will report this week, starting with Microsoft after the close of trading on Tuesday, with bluechip industrials such as General Electric  (GE) – Get General Electric Company Report, Boeing  (BA) – Get Boeing Company Report, as well as oil majors Chevron  (CVX) – Get Chevron Corporation Report and Exxon  (XOM) – Get Exxon Mobil Corporation Report.

With the Fed in its so-called ‘quiet period’ ahead of its early May policy meeting, investors are also likely to key on the flash estimate of first quarter GDP on Thursday, with analysts expecting a growth rate of 1.1%, and Friday’s reading of the Fed’s preferred inflation gauge, the PCE Price Index, which hit a four decade high of 5.4% last month. 

Oil prices were also on the back foot, with traders paring bets on near-term demand from China — the world’s largest energy importer — as a result of its ‘zero Covid’ policy. 

WTI futures for June delivery were marked $5.85 lower at $96.22 per barrel while Brent contracts for the same month, the global benchmark, tumbled $5.90 to $100.75 per barrel.

On Wall Street, the Dow Jones Industrial Average fell 305 points by late morning trading while those linked the S&P 500, which is down 5.7% for the month and 10.37% for the year, fell another 43 points. The tech-focused Nasdaq Composite, which is down 20% from its mid-November high, fell just 30 points as 2-year note yields eased to 2.571%. 

Twitter  (TWTR) – Get Twitter, Inc. Report shares rose 3.4% amid reports that executives on the board of the social media group began takeover talks with billionaire Tesla  (TSLA) – Get Tesla Inc Report CEO Elon Musk. 

Coca-Cola  (KO) – Get Coca-Cola Company Report gained 0.5% after it posted stronger-than-expected first quarter earnings Monday, while confirming its full-year profit and sales forecasts, amid what the iconic drinks group called a “highly dynamic and uncertain operating environment”.

Tesla shares moved 1.6% lower as Shanghai extended its Covid lockdown into a fourth week, potentially limiting production even further at the carmaker’s key Asia-based factory. 

Activision Blizzard  (ATVI) – Get Activision Blizzard, Inc. Report fell 1.4% after it posted weaker-than-expected first quarter earnings Monday in a surprise pre-market release that indicated softer demand for its latest Call of Duty franchise.