In One Chart: Why stock-market bears are eyeing June lows after S&P 500 falls back below 3,900

What’s driving markets

Stocks searched for upward momentum on Monday following last week’s steep drop, while the market focus was firmly on this week’s two-day meeting of the Fed’s policy-setting Federal Open Market Committee, which is due to end Wednesday. A rate hike of three-quarters of a point is expected, and attention will be put on the accompanying dot plot of rate projections.

Equities pared earlier losses and turned positive as Wall Street embraced Ralph Lauren Corp.’s
RL,
+2.94%
outlook and found value in beaten up home builders and airlines, according to Edward Moya, senior market analyst for the Americas at Oanda Corp.

Shares of Ralph Lauren rose 2.3% after the company outlined its strategic growth plan in a statement and said it expects to return about $2 billion in excess cash flow to shareholders through fiscal 2025 in the form of dividends and share buybacks. It is also targeting a compound annual revenue growth rate over the next three years in the mid to high single digits.

“It looks like higher-income families are still in a good position to handle the next wave of price increases,” Moya said via phone.

Even so, there’s been “a growing amount of pessimism and diminished appetite for all risk assets,” he said. “We are not going to have extreme positioning ahead of the Fed’s decision, and that’s why trading will be volatile for the next 48 hours.”

See: Fed to put a ‘firm foot on the brake pedal’ this week

Stocks felt heat as Treasury yields continued their rise, with the policy-sensitive 2-year rate
TMUBMUSD02Y,
3.935%
heading closer to 4%, a level that some say could send shivers throughout the financial market. The last time the 2-year yield ended the New York trading session at 4% or higher was on Oct. 16, 2007, when it closed at 4.127%. Rising yields make bonds look more attractive relative to stocks.

Key Words: ‘More pain to come’ for stocks as S&P 500 likely to bottom around 3,300, Interactive Brokers’ founder says

The U.K. stock market was closed in observance of the funeral of Queen Elizabeth II in London, attended by heads of state including U.S. President Joe Biden.

Need to Know: The mighty dollar may be about to crack, says this strategist, who offers stocks to watch on either side.

Companies in focus

• Shares of the three key vaccine makers fell Monday following Sunday’s “60 Minutes” interview with President Joe Biden, who said the pandemic is over. Shares of Moderna Inc. 
  MRNA,
  -7.76%
  fell 9.5%. Pfizer Inc. 
  PFE,
  -1.24%
   was down 1.9% and its German partner BioNTech SE
  BNTX,
  -8.34%
  dropped 9.5%.

• AutoZone Inc.
  AZO,
  -2.69%
  shares fell 2.8% even after the auto-parts retailer reported fiscal fourth-quarter profit and sales that rose above expectations, helped by continued strength in its commercial business.

• German auto maker Volkswagen AG
  VOW,
  +3.34%
  is targeting a valuation of up to $71.5 billion (75 billion euros) for its initial public offering of Porsche, in what would be one of Europe’s largest-ever IPOs. Volkswagen’s board announced Sunday it intends to list shares between 76.50 and 82.50 euros, in the middle range of analysts’ expectations. Volkswagen’s U.S. common stock
  VLKPF,
  +3.19%
  rose 3.2%.

Hear from Ray Dalio at the Best New Ideas in Money Festival Sept. 21-22 in New York. The hedge-fund pioneer has strong views on where the economy is headed.

— Steven Goldstein contributed to this article.