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Stocks Slammed After Yield Curve Flashes Recession Warning

Published 08/14/2019, 01:43 PM
Updated 08/14/2019, 04:12 PM
© Reuters.

Investing.com – Stocks plunged Wednesday after a key economic signal flashed a recession warning and both Germany and China showed more signs of slowing growth.

A brief attempt at recovery ran out of gas. By 3 PM ET (19:00 GMT) the major averages were near their lows. The Dow had fallen as many as 782 points.

The S&P 500 was off 2.75%. The Dow Jones industrials were down 2.85%, and the Nasdaq Composite was off 2.9%.

The emotional catalyst came early in the day when the yield on the 10-Year Treasury note briefly fell below that of the 2-Year Treasury for the first time since 2007. That suggests investors were unwilling to commit money for longer-term investments.

The 10-year yield was at 1.581% at 1:30 PM ET while the 2-year yield was at 1.577%.

The market slump comes in the backdrop of the continuing trade fight between the United States and China, which has hit Chinese exports and exports of a number of U.S. products, especially soybeans.

Slumping exports sent Germany's economy into reverse in the second quarter, while Chinese industrial output growth cooled to a more-than-17-year low in July.

Interest rates globally have fallen as the scope of the slowdown has emerged. The Federal Reserve cut its key interest rate on July 31 in the face of bitter criticism from President Donald Trump. The Fed is expected to cut rates again at its meeting in mid-September.

None of the Dow stocks was higher, although Coca-Cola (NYSE:KO) and Walmart (NYSE:WMT), both classic defensive stocks, were off only slightly. Boeing (NYSE:BA), Apple (NASDAQ:AAPL), Goldman Sachs (NYSE:GS), JPMorgan Chase (NYSE:JPM) and 3M (NYSE:MMM) were the biggest contributors to the Dow's decline. Boeing's decline was worth 68 Dow points.

Facebook (NASDAQ:FB), Amazon.com (NASDAQ:AMZN), Cisco Systems (NASDAQ:CSCO) and Tesla (NASDAQ:TSLA) were all off at least 3%.

Oil prices were lower and gold futures settled up $13.70 to $1,527.80. Gold is up more than 6% in August and 19% on the year.

In seven of 11 trading days so far in August, the Dow has risen or fallen more than 275 points during the day.

Latest comments

tomorrow something will happen to push the stocks higher. Some kind of news or tweet. The usual. The problem is this eventually will make even the hardest bull loose patience and money. Recession this time will come from Europe especially after Brexit.
The rate of interest go down because some big large financial players play it so; a group of large institutions controlled by vested interests play the game. Then the media takes over, which is also partly in their hands. Then the herd mentality of humans gets unleashed. The legendary cry of 'Lion' during cavemen days made them run for cover without checking. It repeats in modern era too. The open society people want Trump to go. The game started.
Individual Egos are ruining the worlds economy and the financial markets.
We living in the first stages of recession, the macroeconomic noise has been out there for a while now and investors are not quite bearish on equities
for the long term this means you take your money out or short the stocks
plunge protection team had the day off
What does this mean for the long run
Nothing if you mean ten years or more. if you are talking about two years then you are seeing the signs of recession/stock market correction
tomorrows title: wall street trade deal optimism pushes stocks higher
Fear mongering. Weak money responds as expected.
Oh yeah, i made $100 today and im still happy.
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