Bond Yields Turn Sharply Lower, Disney Earnings Disappoint, Trade Tension Remains

After the tsunami that hit Wall Street on Monday, markets remain on edge. Take a look at how stock futures tumbled early Wednesday amid pressure from a jumpy bond market.

The bond market went crazy in the two hours before the open Wednesday in what appeared to be fallout from an influential trading firm predicting that U.S. yields could go negative. The 10-year yield sank from 1.77% at one point Tuesday down to 1.63% early Wednesday. Lower yields—which often signal worries over economic weakness—might be putting pressure on stock values.

This sudden reversal after stock futures had been up earlier could be another sign of how volatile stocks are right now, and possibly of thin volume. A thinly-traded market can sometimes exacerbate moves, and August trading can be light as many traders and investment pros tend to step away from their desks during what’s typically a sleepy month.

One possible reason for the bond market hiccups might be more soft data from Europe Wednesday as Germany reported a 1.5% drop in June industrial production from the previous month, something the Financial Times said could compound fears that Europe might be heading for a recession. The softness there is one major reason for pressure on interest rates here, and caution seems to be growing.

News also hit overnight that India, New Zealand, and Thailand all cut rates. U.S. yields remain inverted, and German bund yields are at new all-time lows. The U.S. 10-year yield is the benchmark and remains one to watch. Further losses there could spill into stocks as nerves tighten.

Before the sudden drop in futures, things seemed calmer. Financial headlines focused on exactly where China set its currency overnight. It’s probably fair to say that most of us didn’t start investing because we were interested in China’s daily

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