U.S. stocks fell sharply at the start of trade Wednesday, following a series of worrying data on global economic growth, and after the yield on the 10-year U.S. Treasury note fell below that of the 2-year note, marking an inversion of the main measure of the yield curve and flashing a recession warning signal.
The retreat threatens to reverse gains notched on Tuesday, after investors cheered news that the Trump administration would delay the imposition of some new tariffs on Chinese goods, from Sept. 1 to Dec. 15.
How are the major benchmarks faring?
The Dow Jones Industrial Average DJIA, -1.46% fell 390 points, or 1.5%, to 25,879, while the S&P 500 index SPX, -1.44% shed 42 points, or 1.4%, to 2,885. The Nasdaq Composite COMP, -1.60% meanwhile, lost 123 points, or 1.7%, to 7,886.
On Tuesday, the Dow Jones Industrial Average rose 372.54 points, or 1.4%, to end at 26,279.91, for the biggest one-day gain in two months. The S&P 500 index added 42.57 points, or 1.5%, to close at 2,926.32. The Nasdaq Composite Index rose 152.95 points, or 2%, to 8,016.36.
What’s driving the market?
The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, -5.60% fell below that of the 2-year U.S. Treasury note TMUBMUSD02Y, -4.13% for the first time in more than a decade early Wednesday as investors digested weak economic data out of China and Germany.
Stock index-futures extended premarket losses after the spread between the 10-year and 2-year notes briefly turned negative shortly after 6 a.m. Eastern Time, a phenomenon referred to as a yield-curve inversion, because yields on longer-term debt are typically higher than those for short-term bonds. This follows the inversion of the spread between the 10-year note and the 3-month, which has been negative since March.