U.S. stocks sunk Monday as investors digested the first releases in a week full of economic data and mulled what recent data could mean for Federal Reserve policy ahead.

The S&P 500 (^GSPC) fell by 1.8%, while the Dow Jones Industrial Average (^DJI) was down by 1.4%, or more than 480 points. The technology-heavy Nasdaq Composite (^IXIC) fell by 1.9%.

The economic data front provided further bearish signals for stocks, as key indicators came in stronger than expected. Leading the economic calendar for the week was the release of the Institute for Supply Management's (ISM) services index. The index expanded faster in November than anticipated, at a 56.5 level compared to estimates of 53.5 and above October’s reading of 54.4, painting the picture of a still-strong services industry.

Meanwhile, new orders for U.S.-manufactured goods also beat expectations, rising 1.0% in October.

In a separate report, however, S&P Global's the Purchasing Managers’ Index (PMI) stood at a 46.2 level in November, down from the October reading of 47.8. New business activity fell at the sharpest rate since May 2020, S&P Global said.

The new data comes on the heels of Friday's hotter-than-expected jobs report, which sent stocks to a choppy session. The strong job gains and robust wage growth are the opposite of what the Federal Reserve would like to see in its battle against inflation. Friday’s figures showed demand for workers remains out of balance with supply, signaling that Fed policymakers could either take rates higher than previously anticipated or hold them higher for longer in restrictive territory.

New readings on the producer price index (PPI) — which measures prices paid for goods and services before they reach consumers and consumer sentiment — will be out this week.

The narrative from U.S. central bank officials, now in their pre-meeting blackout period, has suggested they would downshift to a half-point hike at their Dec. 13-14 meeting, after four consecutive 75 basis-point increases. Investors are now wondering how much longer will the central bank continue to hold its tightening campaign, how high the federal funds rate will end up, and how long it will stay there.