• Detroit-based Rocket Companies was among the biggest losers. Rocket Companies lost 15.35% or $2.42 a share Monday to close at $13.35 a share.

Stagflation — the deadly mix of a sluggish economy and high inflation — is a new monster under the bed that’s scaring Wall Street and 401(k) investors alike.

On Monday, fears of recession ahead picked up more steam. And the Dow Jones Industrial Average dropped more than 1,145 points in trading Monday afternoon, losing 2.68%.

The Dow regained some footing but still closed at 41,911.71 points Monday, down 890.01 points or 2.08%.

The Dow is down drastically from its record close of 45,014.04 points on Dec. 4. The blue chip index has lost 3,102.33 points — or nearly 6.9% — in a little bit more than three months.

Stagflation is word that your Mom or Grandma might remember, depending on when you were born. It was a popular term during the miserable economy in the late 1970s and early 1980s when middle class families dealt with soaring prices for gas and groceries, particularly meat. Many also got hit with massive layoffs and job cuts in the auto industry and elsewhere at the same time, triggering the term stagflation.

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High prices remain worrisome

Right now, inflation is down from the incredible pandemic-related spike in the summer of 2022. Even so, inflation remains stubborn at these levels. The Consumer Price Index rose 3% in January over the last 12 months. That’s after going up 2.9% over the 12 months ending December.

The Consumer Price Index for February is scheduled to be released Wednesday.

On top of that, many are worried that the continued threat of President Donald Trump’s tariffs ultimately could drive prices even higher on a long list of consumer goods, including everything from avocados to automobiles.

On Wednesday, Trump gave a 30-day reprieve on tariffs on Canadian and Mexican imports used by domestic automakers. But threats of additional tariffs remain.

Yet on Monday, Ontario started a 25% surcharge Monday for the electricity it exports to three U.S. states — Michigan, Minnesota and New York. Ontario Premier Doug Ford warned at a news conference that he would not hesitate to shut off the lights, if you will, and cut off the electricity Canada exports to the United States if the trade war escalates.

Ford estimated on average the Canadian surcharge could add $100 to monthly electricity bills for Americans who once benefited from the power flow.

Michigan receives a substantial amount of electricity from Ontario, but the state does not consume most of it, said Dan Scripps, chair of the Michigan Public Service Commission. Michigan utilities, DTE and Consumers Energy, generate much of their own electricity or have long-term power purchase agreements with wholesale markets, Scripps said.

Even so, the added uncertainty is hardly welcome.

More: Michigan gas prices rise, AAA urges drivers to be extra cautious with time change

More: Dan Gilbert’s Rocket Companies to buy real estate brokerage firm Redfin in $1.75B deal

How Detroit auto stocks fared Monday

Some stocks faced harder hits than others on Monday.

Detroit-based Rocket Companies was among the biggest losers. Rocket Companies lost 15.35% or $2.42 a share Monday to close at $13.35 a share. Rocket the same day announced plans for a $1.75 billion all-stock deal to buy the online real estate brokerage firm Redfin.

Auto stocks, which suffered a great deal last week on tariff woes, had a relatively decent day Monday. All things being relative.

General Motors stocks actually ended the day up, gaining 64 cents a share or 1.35% to close at $48.08 a share.

Ford Motor stock was up too, gaining 6 cents a share or 0.61% to close at $9.96 a share.

Stellantis closed at $12.87 a share, up 14 cents or 1.10%.

Tesla stock continued a long slide of seven straight weeks of losses and was a major loser Monday, declining 15.43% or $40.52 a share to close at $222.15 a share. Tesla CEO Elon Musk is a key figure in the dramatic, and many times unpopular, cost cutting efforts in Washington, D.C., and sales have been dropping.

Will interest rates start falling soon?

Wall Street also might be more on edge about the prospects that borrowers will see more interest rate relief soon.

The Federal Reserve has its next meeting March 18 and March 19. Earlier, many had expected the Fed to give borrowers another cut in interest rates.

The Fed’s last rate cut was in December, the third reduction in short-term interest rates in 2024. Short term rates have fallen by a full percentage point since late September. But interest rates had more room to go down.

Yet some economists are increasingly skeptical that the Fed will lower rates in March.

“I expect the Fed to sit on its hands at next week’s meeting, and keep interest rates unchanged,” said Mark Zandi, chief economist for Moody’s Analytics.

Zandi said Fed officials likely want more clarity regarding the dramatic shifts in economic policy from the Trump administration before changing interest rates.

“And that doesn’t look likely anytime soon,” Zandi said.

Uncertainty, he said, remains regarding “everything from tariffs and DOGE cuts to government jobs and funding, to mass immigrant deportations and a revival of the Treasury debt limit battle later this spring.”

Zandi call the uncertainty and stress caused by all these policy moves “unprecedented.”

“Indeed, I don’t expect the Fed to resume cutting rates again until later this fall, with a quarter point cut in September and another cut in December,” Zandi said.

“Of course, if the U.S. precipitates a global trade war, this would likely cause a recession, and push the Fed to cut rates sooner and more aggressively.”

Wall Street has long been looking forward to lower interest rates, which would reduce the cost of borrowing for everyone from consumers to big companies.

“Those looking to buy a home or vehicle should be cautious given rising recession risks,” Zandi said.

“If they are confident in their job they should wait until mortgage and vehicle rates fall, which seems increasingly likely given the prospects for a faltering economy.”

Zandi posted on X on Monday that the risks of a U.S. recession starting in the coming year are “uncomfortably high and rising.”

He put the risk of a recession at 35%, up from 15% at the start of the year. For context, Zandi noted, the typical recession probability is 15%.

Contact personal finance columnist Susan Tompor: [email protected]. Follow her on X @tompor.