By Connor Smith | Friday, February 21

Risk Off. Suddenly, Wall Street is worried about the economy.

The Dow Jones Industrial Average dropped 750 points, or 1.7%, today. The S&P 500 also fell 1.7%. Both marked their biggest declines since Dec. 18. The Nasdaq Composite slid 2.5%.

UnitedHealth Group was a big drag on the Dow, shaving 221 points off the index in the wake of a report from the Wall Street Journal that said the Department of Justice was looking into the health insurer's Medicare billing practices. 

Market's were in risk-off mode in the wake of a wave of economic data that showed cracks in key parts of the economy. Bond yields were falling, and the only major S&P sector on the rise was consumer staples.

S&P Global's survey of activity in the manufacturing and services sectors came up short of expectations. Wall Street was already jittery about the economy after Walmart's weak outlook on Thursday. Sevens Report Research's Tom Essaye told me the soft services side was weighing on stocks:

It supports the idea that all the policy uncertainty, chaos, and volatility is starting to actually impact the economy. Obviously we can’t say that for sure yet, but it was a pretty weak number. 

Growth has been the unsung hero supporting stocks through all this volatility and the higher than expected inflation numbers. If growth starts to give away then this market could drop a lot.

Markets are priced for good news, with the S&P 500 closing at a record as recently as Wednesday. Frank Cappelleri, founder of technical analysis firm CappThesis, points out that the S&P hadn't fallen 1% or more since Jan. 27.

"A session like this was bound to happen," Cappelleri told me. "Buyers stepped in early yesterday to limit the damage, but the lack of upside follow-through this morning allowed sell-side momentum to take over."

On the bright side, bond yields are finally retreating again. The yield on the 2-year Treasury note was down to 4.19% this week, while the 10-year Treasury yield was down to 4.42%. Traders see a 63.7% chance of an interest-rate cut from the Federal Reserve in the first half of the year, according to the CME FedWatch Tool. That's up from 50.4% a week ago.

The key question for markets is whether such a cut will be prompted by slowing price growth or a slowing economy. We'll get some hints from the Fed's preferred inflation gauge a week from today.

Watch our TV show on Fox Business Saturdays and Sundays at 9:30 a.m. and 10:30 a.m. ET. This week, Gregory Peters, co-chief investment officer of PGIM Fixed Income, on the outlook for bonds and interest rates. Plus, ways to play the surge in gold prices.

DJIA: -1.69% to 43,428.02
S&P 500: -1.71% to 6,013.13
Nasdaq: -2.20% to 19,524.01 

The Hot Stock: Moderna +5.3%
The Biggest Loser: Akamai Technologies -21.7%

Best Sector: Consumer Staples +1.2%
Worst Sector: Technology -2.7%