- Stocks plunged on Wednesday morning after the yield on
30-year Treasurys dropped to a new low and the
spread between two- and 10-year Treasurys inverted for the first
time since 2007.
- The inversion of the yield curve compounded concerns of
an economic slowdown in the US, as the occurrence has preceded each
of the last seven recessions.
- Disappointing economic data from Germany and China
caused the rally in global bonds as investors shifted away from
equities toward the relative-safety of long-term
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US stocks plummeted on Wednesday after
the spread between two- and 10-year Treasury yields fell below
zero for the first time since 2007, igniting fears of an
The occurrence is also referred so as “an inversion of the yield
curve,” and its happened before each of the last seven recessions.
The inversion has been coming for some time now, as the spread has
been shrinking over the last several months.
Meanwhile, the yield on 30-year Treasurys also fell to a new
low, piling onto concerns of a recession.
Here’s a look at the major indexes as of the 11:45 a.m. EST on
- The S&P
500 fell 1.74%, to 2,875.45.
- The Dow
Jones Industrial Average dropped 1.73%, to 25,824.63.
- The Nasdaq
Composite slid 1.94% to 7,860.67.
Worrisome data from Germany and China, two of the world’s
largest economies, spurred the bond rally as investors fled to the
relative-safety of haven investments like long-term
China’s industrial output growth shrunk to a 17-year low in
July and fell short of analysts expectations. Retail sales and
capital spending for July also came in below forecasts, indicating
a broad-based slowdown in China’s economy.
Germany’s economy contracted by .1% in the second quarter as
exports slumped amid the trade war between the US and China.
Bank stocks also fell amid the broad-market sell off as
investors grew worried about profits from their lending businesses.
and Bank of
America slid-more than 3%, as JPMorgan
tumbled about 2.5%.
Wednesday’s losses erased gains from a rally on Tuesday that was
prompted by the
Trump administration’s decision to delay some tariffs on
Chinese imports in September.
Source: FS – All – Economy – News
Stocks plummet as yield-curve inversion triggers recession fears