US stocks plummet as Treasury yields soar to 3-year highs and investors assess COVID-19 outbreak in China

• US stocks cratered on Monday as investors grappled with soaring Treasury bond yields.
• The US 10-Year Treasury yield surged as much as 12 basis points to a three-year high of 2.78%.
• Meanwhile, city-wide COVID-19 lockdowns in China led to plant shutdowns and production halts for various automakers.

US stocks plunged on Monday as investors grapple with a continued rise in interest rates and a surge in COVID-19 cases across different Chinese cities.

The 10-Year US Treasury yield surged 12 basis points to a three-year high of 2.78% on Monday. The surge comes as the Federal Reserve looks set to initiate a rate hike of 50 basis points at next month's meeting of the Federal Open Market Committee along with a $95 billion monthly reduction of its balance sheet, according to its most recent meeting minutes.

Meanwhile, a surge in COVID-19 cases in China has led to city-wide lockdowns, including in Shanghai, a city of about 26 million people. The lockdowns have led to ongoing supply chain disruptions for automakers, including Nio, which was forced to halt production of its electric vehicles over the weekend. Tesla's Shanghai plant has also been shut down for about two weeks.

Here's where US indexes stood at the 4:00 p.m. ET close on Monday:

• S&P 500: 4,412.63, down 1.69%
• Dow Jones Industrial Average: 34,308.08, down 1.19% (413.04 points)
• Nasdaq Composite: 13,411.96, down 2.18%

While China is grappling with an economic slowdown due to COVID-19, Fundstrat's Tom Lee views it as a potentially bullish catalyst for stocks, as the growth slowdown will give the Fed flexibility in its future interest rate hikes.

Twitter shares moved higher on Monday after news broke that Tesla CEO Elon Musk would no longer be joining the board of the company after acquiring a 9% stake. There was no indication that Musk would sell down his stake.

BlackRock thinks the Fed won't raise interest rates as much as the market thinks as inflation begins to turn lower. That could be a boon for risk assets.

"We are in a tightening dynamic, we are in a tightening period, but I don't think it's going to be as aggressive as what the market is pricing in at the moment, which is very, very aggressive," BlackRock's Head of APAC iShares Investment Strategy Thomas Taw said.

AT&T stock jumped 8% on Monday after it completed the spinoff of its WarnerMedia division to Discovery. AT&T will no focus on its telecom operations, which JPMorgan viewed as a bullish development in a Monday note. The bank upgraded AT&T to "Overweight" with a $22 price target.

Oil prices were lower on Monday due to concerns of decreased demand for the commodity as China grapples with its latest surge of COVID-19 cases.

West Texas Intermediate crude oil fell as much as much as 3.92% to $94.41 per barrel. Brent crude, oil's international benchmark, fell as much as 3.60% to $99.08.

Bitcoin fell 5.00% to $40,002. Ether prices fell 5.53% to $3,000.

Gold rose as much as 1.05% to $1,966.10 per ounce. The yield on the 10-year Treasury added nine basis points to 2.75%.