Financial markets have priced in an 18 per cent likelihood of a super-sized, 100 basis point increase to the Fed funds target rate on Wednesday, according to CME’s FedWatch tool.
The Dow Jones Industrial Average fell 139.4 points, or 0.45 per cent, to 30,822.42, the S&P 500 lost 28.02 points, or 0.72 per cent, to 3,873.33 and the Nasdaq Composite dropped 103.95 points, or 0.9 per cent, to 11,448.40.
Nine of the 11 major sectors of the S&P 500 ended in negative territory, with energy and industrials suffering the sharpest percentage drops.
Dow Transports, viewed as a barometer of economic health, plummeted 5.1 per cent.
That drop was led by FedEx shares tanking by 21.4 per cent, the biggest drop in the S&P 500.
Peers United Parcel Service and XPO Logistics slid 4.5 per cent and 4.7 per cent, respectively, while Amazon.com slipped 2.1 per cent.
The session also marked the monthly options expiry, which occurs on the third Friday of every month. Options-hedging activity has amplified market moves this year, contributing to heightened volatility.
The CBOE Market Volatility index, often called “the fear index”, touched a two-month high, breezing past a level associated with heightened investor anxiety.
Declining issues outnumbered advancing ones on the NYSE by a 3.04-to-1 ratio; on Nasdaq, a 2.24-to-1 ratio favoured decliners.
The S&P 500 posted no new 52-week highs and 56 new lows; the Nasdaq Composite recorded 21 new highs and 387 new lows.
Volume on US exchanges was 16.92 billion shares, compared with the 10.72 billion average for the full session over the last 20 trading days.