Dow tumbles 400 points after bond market flashes a recession warning
David Goldman byline
By David Goldman, CNN Business
Updated 9:39 AM ET, Wed August 14, 2019
New York (CNN Business) -- The Dow slid more than 400 points Wednesday after the bond market, for the first time in over a decade, flashed a warning signal that has an eerily accurate track record for predicting recessions.
Here's what happened: The 10-year Treasury bond yield fell near 1.6% Wednesday morning, dropping just below the yield of the 2-year Treasury bond. It marked the first time since 2007 that 10-year bond yields fell below 2-year yields.
US stocks fell as investors sold stock in companies and moved it into bonds. The Dow (INDU) was about 1.5% lower. The broader S&P 500 (SPX) was down 1.4% and the Nasdaq (COMP) sank 1.6% Wednesday morning.
....
CNN Business' Fear and Greed Index signaled investors were fearful. The VIX (VIX) volatility index spiked 17%.
Investors are on edge because the German economy shrank in the second quarter, and the US-China trade war still looms large over markets, despite the latest truce. Industrial production in China grew at the weakest rate in 17 years.
As the global economy sputters, investors are plowing money into long-term US bonds. The 30-year Treasury yield fell to 2.05%, the lowest rate on record.
Government bonds — particularly US Treasuries — are classic "safe-haven" assets that investors like to hold in their portfolios when they're nervous about the economy. Stocks, by contrast, are riskier assets that tend to be more volatile during economic slowdowns.
....
= new reply since forum marked as read