The Nasdaq Composite hit a closing high on Monday, and the S&P 500 eked out a record, but Wall Street investors are keeping a close eye on a key Federal Reserve meeting that kicks off tomorrow.
The central bank's next steps are being watched closely by traders, including legendary hedge fund manager Paul Tudor Jones.
The billionaire investor told CNBC's Andrew Ross Sorkin on "Squawk Box" that the Fed risked damaging its credibility if its inflation forecasts proved wrong and said that the combination of easy monetary policy amid massive stimulus was the "craziest" approach in the central bank's history.
"It turned economic orthodoxy upside down, and that's why this meeting is so important. Things are actually 'bat-s' crazy," Tudor Jones said. "At some point, we have to say, 'OK, let's slow down. We're going to get back in the lane and we're going to drive like we used to.'"
Tudor Jones added that, if the Fed didn't change its approach soon, investors should jump at inflation plays before prices rise even higher. He also warned that the valuation of the stock market relative to the total economy made him nervous.
Tech stocks caught a bid today, which propelled the Nasdaq and S&P 500 to new heights in the afternoon. Netflix jumped nearly 2.3%, while Apple climbed close to 2.5%. The Dow Jones Industrial Average lost 85.85 points.
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