Strong early gains Monday for energy and financial issues could not stem the avalanche of selling in tech, says Jon Markman, growth stock specialist and editor of Strategic Advantage.

The benchmark S&P 500 (SPX) lost 1.3% to finish at 4,300. The carnage was even worse for the Nasdaq, which shed 2.1%.

Traders are worried that the United States government is headed off a “fiscal cliff” as politicians wrangle about raising the debt ceiling. Failure means the government might default on its debt, throwing the global economy into turmoil. It is beyond reckless that pols would let this happen, yet here we are.

The S&P 500 is now down 5.4% from its record high in early September. Selling pressure is likely to continue until the issue is resolved. Critical support for the benchmark S&P is 4,257. A test of that level could happen Tuesday. Resistance is 4,440.

This marks the largest sell-off for US equity markets in 2021. Stocks are essentially consolidating following a historic rally that saw the S&P 500 rise more than 100% off of the March 2020 lows through the early September high.

The Dow fell 0.9% to 34,002.92. Communication services stocks were the biggest decliners while energy was the top gainer among the sectors.

Breadth favored decliners 3-1, and there were 231 new highs vs. 308 new lows. Big caps on the new high list included JPMorgan Chase (JPM), Bank of America (BAC), Netflix (NFLX), Merck & Co (MRK), and Royal Dutch Shell (RDS-A). Mostly cyclicals.

The 10-year US Treasury yield rose by 1.5 basis points to 1.48%, up from 1.30% in mid-September. West Texas Intermediate crude oil jumped 2.3% to $77.62 per barrel.

OPEC and allied producers led by Russia reportedly agreed to stick with their current plan of increasing joint output by 400,000 barrels a day from November, in line with an agreement in July.

US Trade Representative Katherine Tai pledged frank talks with Chinese counterpart Liu He concerning the Phase 1 deal made under former President Trump's administration, as well as other trade concerns, media reports said.

"Above all else, we must defend—lto the hilt—our economic interests," Tai said in an event hosted by the Center for Strategic and International Studies think tank. "That means taking all steps necessary to protect ourselves against the waves of damage inflicted over the years through unfair competition."

Markets are concerned about the US being closer to its first-ever default, as neither political party has given signs of compromise on the federal debt limit. President Joe Biden on Monday said he could not guarantee the raising of the country's debt ceiling in two weeks amid Republican opposition, CNN reported.

"Republicans say they will not do their part to avoid this needless calamity. So be it. But they need to stop playing Russian roulette with the US economy," Biden said. Congress has until Oct. 18 to increase the country's debt ceiling.

The only economic data released Monday was a stronger-than-expected 1.2% gain in factory new orders, while shipments rose by 0.1% and unfilled orders rose by 1%, indicating that supply continued to lag demand.

In corporate news, a former Facebook (FB) employee alleged the social media company prioritizes making profits over the well-being of its users and that it hasn't made much progress in its campaign against hate speech on its platform, in an interview aired Sunday on CBS' 60 Minutes. Shares were down 4.9%, among the worst performers on S&P 500.

Meanwhile, Merck rose 2.1% after saying it would apply for emergency use authorization in the US and elsewhere for its experimental antiviral COVID-19 therapy pill. Moderna (MRNA), a COVID-19 vaccine producer, extended last week's decline, slumping 4.5%.

Learn more about Jon Markman here…