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Share to FacebookShare to TwitterShare to LinkedinTopline U.S. stocks plunged Wednesday morning as a sell-off in the tech sector on inflation concerns coincided with a massive drop in cryptocurrencies ahead of the release of minutes of the last Federal Reserve meeting.

A worker wearing a protective mask passes in front of the New York Stock Exchange (NYSE) in the … [+] Financial District of New York, U.S., on Friday, March 5, 2021. Stocks climbed as technology shares rebounded from an earlier selloff. Photographer: Michael Nagle/Bloomberg

© 2021 Bloomberg Finance LP Key Facts As of 11:20 a.m, the S&P 500 was down 46,84 points, or 1.13%, to4,080.99, the Dow Jones Industrial Average was off 442.84 points, or 1.3%, to 33,617.82; and the tech-heavy Nasdaq Composite dropped 85.49 points, or 0.65%, to 13,217.38.

By S&P sector, energy stocks tallied the biggest losses on Wednesday, plunging 3.17%.

Cryptocurrencies were also selling off, with bitcoin plunging 13.85% in value over the past 24 hours to below $37,157 –  far below its all-time high of $65,000 —  while Ethereum has plummeted 21.9% over the past day to below $2,653.

Shares of Tesla, which bought $1.5 billion worth of bitcoin in February, were down 3.8%, while Coinbase, the public cryptocurrency exchange, tumbled 8.7%.

One bright spot in the market is retailer Target, up 4.42%, after delivering blowout first-quarter earnings results.

Key Background Cryptocurrency price weakness and volatility has been exacerbated by the Chinese central bank’s renewal of a pledge Tuesday to prohibit use of cryptocurrencies for payments and cracking down on digital assets. Crypto also swooned after Tesla boss Elon Musk tweeted last week that his company would no longer accept bitcoin as payments due to the environmental impact of minting the coins. As for the stock market, inflation is weighing on traders minds, especially tech investors who have witnessed a 5% drop in Nasdaq this month. Last Thursday, the Bureau of Labor Statistics reported that its producer price index rose 6.2% in April over the same month a year ago, suggesting strong inflationary pressures. “The major question for markets right now is whether the Fed is right and this increase in inflation is just temporary, because if inflation is not temporary, it could unleash a very painful period for virtually all investors,” Tom Essaye, founder of Sevens Report, wrote in a note.

Crucial Quote “There is no question that bitcoin has been the poster child for rampant market speculation and risk appetite,” Peter Boockvar, chief investment officer at Bleakley Advisory Group told CNBC. “Thus, it should be absolutely monitored in gauging the pulse of risk taking, and now risk aversion.”

What To Watch For On Wednesday afternoon the Federal Reserve will release minutes from its April meeting, likely providing some insight on the central bank’s assessment of inflation, the strength of the economic recovery, and any possible hints of adjustment to its accommodative monetary policies. Luke Lloyd, investment strategist at Strategic Wealth Partners in Independence, Ohio, told Forbes the Fed must evaluate both stock market volatility and inflation and find a happy compromise. “Will [the Fed] let the economy run hot as the great reopening party gets started or will they risk cooling off the economy to early?” he said. “My bets are placed that they would rather let the economy run hot and not hike interest rates too soon, which is good for the stock market over the next year.”

Further Reading Why The Nasdaq Stock Market Is A Focal Point Now (Forbes)

Here’s Why Experts Think The Stock Market Could Rip Higher As Stocks Test New Highs (Forbes)

May 2021 Stock Market Outlook (Forbes)