US stocks plunged in trading Monday as some better-than-expected economic data sparked fresh anxiety among investors about Federal Reserve interest rate hikes.

The Dow Jones Industrial Average was down 524 points, or 1.52%, in late afternoon trading. The tech-heavy Nasdaq fell 260 points, or 2.27%, while the broad-based S&P 500 plunged 85 points, or 2.09%.

The market selloff occurred after activity in the US services sector — the largest portion of the economy — came in stronger than expected for November, according to the Institute for Supply Management’s survey.  

Investors fear stronger economic trends will lead the Fed to implement more interest rates hikes and potentially “oversteer” the economy into a recession.

“While that’s good news for the growth outlook, it’s not so great for the Fed trying to dampen demand and ease inflation,” BMO Capital Markets economist Priscilla Thiagamoorthy told Reuters.

The market remains uncertain about the Fed’s policy path ahead of the central bank’s key final policy meeting of the year on Dec. 13 and 14. The next update on inflation is also expected next Tuesday, when the Bureau of Labor Statistics releases its latest Consumer Price Index data for November.

Fed Chair Jerome Powell has repeatedly signaled that interest rate hikes will continue for the foreseeable future, though the exact size and pace of those hikes is dependent on economic data. In a speech last week, Powell warned the Fed could hike its benchmark by more than it initially expected as it aimed to bring down inflation.

Investors are pricing in a nearly 75% probability that policymakers will hike the benchmark interest rate by a half-percentage point — a move that would signal the Fed is slowing the pace of its policy tightening. The Fed has hiked by three-quarters of percentage point at its last four meetings.

However, the market still sees a 25% probability of another larger, three-quarter-point hike.

“Clearly, equity markets want to move higher, but that’s very dependent on inflation getting under control,” Peter Essele, head of portfolio management at Commonwealth Financial Network, told CNBC. “And so, when you have above expectation prints on any econ number that comes out, that tends to fuel inflationary concerns, which sends rates higher.”

Tesla was among the day’s biggest losers. Shares of the electric car maker fell nearly 7% after the company warned it could cut production of its Model Y by more than 20% in China due to weaker demand.

In the cryptocurrency sector, bitcoin fell about 1% to $16,922 as the bankruptcy of FTX reverberates through the industry.

With Post wires