The stock market dropped on Monday after China implemented new lockdowns. The focus will now turn to a familiar topic – the Federal Reserve.

*The Dow Jones Industrial Average fell 45 points, or 0.1%, the S&P 500 dropped 0.4%, and the Nasdaq Composite declined 1.1%.

*China locked down a transportation hub and virus-related deaths were reported for the first time in almost six months.

*The stocks of companies that see a chunk of their sales from China got hit. Estee Lauder (ticker: EL) stock fell more than 6%, while Apple (AAPL) dropped more than 2%. Micron Technology (MU) and Nvidia (NVDA) stocks fell more than 2% and less than 1%, respectively.

“Not only would fresh lockdowns in major cities take a sledgehammer to growth into year-end, but it could also complicate any plans that are being put in place to soften the zero-Covid policy next year,” wrote Craig Erlam, senior market analyst at Oanda. “We're back into uncertain territory which could slow the recovery in stock markets.”

China is also a major oil buyer, so the price of WTI Crude dropped to as low as $75 a barrel Monday. It ended at just under $80, still down 0.4% on the day, as it is already down double digits in percentage terms since early November after a brief rally. Oil stocks dropped Monday, with the Energy Select Sector SPDR Exchange-Traded Fund (XLE) dropping 1.4%.

Looking ahead, markets are awaiting more commentary from the Federal Reserve about interest rates. The Federal Open Market Committee’s minutes are released and, next Wednesday, Fed chair Jerome Powell speaks at the Brookings Institution.

Markets will be monitoring whether the commentary indicates a slowdown in the pace of interest rate hikes. Right now, there’s a roughly 75% chance that the Fed lifts the federal funds rate by a half of a percent rather than the three-quarters of a percent hike seen in the past few meetings, according to CME Group data. Rate hikes are meant to reduce inflation by lowering economic demand, and recently, the rate of inflation has declined.

“Inflation is cooling so the Fed can legitimately downshift its rate hikes to something other than 0.75%,” wrote Jeffrey Roach, chief economist at LPL Financial.

The risk, though, is that the Fed comes across as more aggressive in its rate-hiking stance than anticipated. That’s especially true since the stock market has already rallied on hopes of a less aggressive Fed. The S&P 500 entered Monday up about 11% from its lowest close of the year hit in early October.

A pullback was “inevitable,” wrote John Kolovos, chief technical strategist at Macro Risk Advisors.

The pullback could just be a pause before more gains.

"Hopefully, those speaking for the Fed will ease back on the hawkish talk this week and Christmas sales will surprise to the upside and keep the seasonal rally intact,” wrote Louis Navellier, founder of Navellier & Associates.

The good news is that Federal Reserve Bank of Atlanta President Raphael Bostic said over the weekend that he was ready to “move away” from larger rate increases.

“In terms of pacing, assuming the economy evolves as I expect in the coming weeks, I would be comfortable starting the move away from 75-basis-point increases at the next meeting,” Bostic said Saturday at the Southern Economic Association annual meeting, Bloomberg reported.