U.S. stocks seesawed Monday with the major averages hitting their lows of the day after Federal Reserve Chair Jerome Powell sounded alarms on surging inflation and vowed tough action.
The Dow Jones Industrial Average shed 201.94 points, or 0.6%, to close at 34,552.99. The blue-chip average was down more than 400 points at session lows. The S&P 500 finished marginally lower at 4,461.18, having been up 0.4% at its highs of the day. The Nasdaq Composite dipped 0.4% to 13,838.46.
Powell on Monday said "inflation is much too high" and pledged to take "necessary steps" to bring prices under control. He noted rate hikes could go from the traditional quarter-percentage-point moves to more aggressive half-point increases if necessary.
The comments at the National Association for Business Economics came less than a week after the Fed raised interest rates for the first time since 2018.
Last week, the three major averages notched their best week since November 2020, boosted largely by growth stocks.
"The rally in equities over the past week was one of the sharpest on record. While it could go a bit higher ... we remain convicted it's still a bear market and we would use this strength to position more defensively," Morgan Stanley's Michael Wilson said in a note Monday.
On Monday, Boeing dropped 3.6% after a China Eastern Airlines Boeing 737 passenger plane crashed. Boeing's decline weighed on the Dow.
Rising rates appeared to hit tech stocks, as the benchmark 10-year yield climbed more than 0.15 percentage points to top 2.3%. Facebook parent Meta lost 2.3% and Microsoft closed marginally lower.
On the upside, energy stocks rallied Monday as oil prices rose. Occidental Petroleum and Marathon Oil were among the top gainers on the S&P 500, each rising more than 8%.
Brent crude gained more than 7% to surpass $115 a barrel, as European Union nations considered joining the U.S. in an embargo on Russian oil.
Market participants are also monitoring the war between Russia and Ukraine. Ukraine's President Volodymyr Zelenskyy warned if peace talks with Russian leader Vladimir Putin fail, it would mean the start of a "third world war."
Ukrainian and Russian officials have met intermittently for peace talks, which have failed to progress to key concessions. Ukraine has also rejected an ultimatum to surrender the city of Mariupol to Russian troops.
Investors are also evaluating a rise in Covid cases in Europe stemming from an emerging variant.
"We still don't believe a sustainable bottom is in place, given our views that the geopolitical situation remains extremely fluid, inflation should continue to come in hot, and the growth outlook is weakening," Wolfe Research's Chris Senyek said in a note Monday.
—CNBC's Patti Domm contributed to this report.