The S&P 500 officially dropped into bear market territory Monday as global financial markets continue to decline following the latest round of U.S. inflation data.

The SPDR S&P 500 ETF Trust (NYSE:SPY) was trading lower by 2.7% on Monday, the SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA) dropped 2% and the Invesco QQQ Trust Series 1 (NASDAQ:QQQ) dropped 3.5%.

Fed In Focus: Selling pressure from Friday continued on Wall Street after the Labor Department reported an 8.6% increase in the consumer price index in May, the highest inflation reading in any month since 1981.

The Federal Open Market Committee begins its two-day meeting on Tuesday. The market is pricing in a 70.8% chance the Federal Reserve will raise interest rates by 0.5% at this week's meeting, but chances of a 0.75% rate hike have now risen to 29.2%, according to CME Group.

"The idea that there is some Goldilocks outcome in the cards or soft landing is a mockery," Danielle DiMartino Booth, CEO and chief strategist of Quill Intelligence, said Monday. "Consumer sentiment is at record lows and jobless claims have surged since bottoming in mid-March, leaving little doubt that the U.S. has entered recession."

Related Link: 'Stunningly High': Experts React To 8.6% CPI Inflation, Highest In 40 Years

The S&P 500 dropped as low as 3,750 on Monday, its lowest level since March 2021. The index has now dropped more than 20% from its all-time high of 4,818 in January and has crossed over into bear market territory.

There have been 14 bear markets since the end of World War II. The median bear market decline has been 30% from recent highs, and the average downturn has lasted an average of 359 days, according to Bespoke Investment Group.

Risk Assets On The Move: Cryptocurrencies, including Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH), took a big hit on Monday as well as investors concerned about rampant inflation dumped risk assets.

Bitcoin prices dropped 15.9% to around $23,500, while Ethereum prices fell 18.3% to around $1,230.

Benzinga's Take: It seems unlikely at this point the FOMC will raise interest rates by 0.75% this week given that investors could interpret a hike that large as a sign of panic from the Fed.

Investors should expect a 0.5% rate hike, but the tone of the accompanying commentary by Fed Chair Jerome Powell will likely have a significant impact on investor sentiment moving forward.

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