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The Closing Bell: U.S. Stocks Drop As Treasury's Flash Warning Signal

TedTed
edited August 14 in The Bullpen
FYI: U.S. stocks slumped and Treasury markets sent a new recession signal Wednesday after weak German and Chinese economic data stoked fears of an impending global slowdown.

The Dow Jones Industrial Average dropped 800 points, or 3.05%,, while the yield on the U.S. 30-year Treasury bond fell to a record low.

he drops erased the optimism sparked a day earlier when the Trump administration abruptly suspended plans to impose new tariffs on goods from China and suggest the volatile swings that have defined trading in August are showing no signs of easing.

Trade tensions between the U.S. and China, uncertainty about the Federal Reserve’s interest-rate policy and signs of slowing economic growth have spurred weeks of turbulence that have rippled through the stock, bond and currency markets since major stock indexes hit all-time highs in mid-July.

In the Treasury market, the yield on the U.S. 30-year Treasury bond touched 2.018%, according to Tradeweb, below the previous intraday low of 2.094% in July 2016. The 30-year is the longest type of U.S. government debt and one of the most sensitive to changes in expectations for long-term growth and inflation.

Meanwhile, yields on the 10-year Treasury note briefly fell below two-year yields for the first time since 2007. This kind of inversion between short and long-term yields is viewed by many as a signal that a recession is likely in the future.

The S&P 500 and Nasdaq Composite declined 2.93% and 3.02%, respectively, after the indexes rose by more than 1% Tuesday. The volatility puts the S&P 500 on track for its sixth swing of at least 2% this year and its sixth consecutive move of at least 1%. The benchmark index has dropped roughly 6% from its closing record last month.

All 11 sectors in the index declined in Wednesday’s sessions, led by energy stocks, which slumped as the price of U.S.-traded crude oil dropped 3.9%. Bank stocks also underperformed as lower yields can weigh on their lending profitability. Citigroup fell more than 5%, while Bank of America dropped 4.5%.

After rallying Tuesday on the tariff reprieve, shares of retailers tumbled as Macy’s lowered its earnings outlook, a troubling sign heading into the key back-to-school and holiday seasons. The department-store operator’s shares fell 13%, dragging down shares of Kohl’s and Nordstrom as well.

Elsewhere, European stocks fell after data showed the German economy shrank in the second quarter. The Stoxx Europe 600 dropped 1.7%, while the German DAX fell 2.2%.

Germany’s economy contracted by 0.1% in the second quarter due to further declines in exports, and the latest data mean that average quarterly growth has been zero since the third quarter of 2018, according to ING.

Still, Asian stocks rallied on the tariff delay, with shares in Shanghai up 0.4% and Japan’s Nikkei up 1%. Hong Kong’s Hang Seng added nearly 0.1% as the city continued to struggle with protests and violence.

Regards,
Ted
Bloomberg Evening Briefing:
https://www.bloomberg.com/news/articles/2019-08-12/your-evening-briefing

MarketWatch:
https://www.marketwatch.com/story/these-stocks-are-falling-the-most-as-treasury-yield-curve-inverts-2019-08-14/print

WSJ:
https://www.wsj.com/articles/asian-stocks-gain-on-tariff-delay-11565769562

Bloomberg:
https://www.bloomberg.com/news/articles/2019-08-13/stocks-to-rally-in-asia-on-tariff-delay-relief-markets-wrap?srnd=premium

IBD:
https://www.investors.com/market-trend/stock-market-today/dow-jones-plunges-800-points-in-crazy-yield-curve-selloff/

CNBC:
https://www.cnbc.com/2019/08/14/stock-markets-wall-street-in-focus-amid-earnings-economic-data.html

Reuters:
https://uk.reuters.com/article/us-usa-stocks/wall-street-tumbles-on-rising-fears-of-recession-idUKKCN1V4172

U.K:
https://uk.reuters.com/article/uk-britain-stocks/ftse-100-sinks-to-two-month-low-on-recession-fears-idUKKCN1V40MI

Europe:
https://www.reuters.com/article/us-europe-stocks/european-shares-slide-to-six-month-low-as-recession-fears-rise-idUSKCN1V40NL

Asia:
https://www.cnbc.com/2019/08/14/asia-markets-august-14-us-china-trade-war-tariff-delays-in-focus.html

Bonds:
https://www.cnbc.com/2019/08/14/us-30-year-bond-yield-falls-to-record-low-threatens-to-break-below-2percent.html

Currencies:
https://www.cnbc.com/2019/08/14/forex-markets-japanese-yen-us-china-trade-war-in-focus.html

Oil:
https://www.cnbc.com/2019/08/14/oil-markets-us-crude-inventories-in-focus.html

Gold:
https://www.cnbc.com/2019/08/14/gold-markets-geopolitics-us-china-trade-in-focus.html

WSJ: Markets At A Glance:
https://markets.wsj.com/us

Major ETFs % Change:
https://www.barchart.com/etfs-funds/etf-monitor

SPDR's Sector Tracker:
http://www.sectorspdr.com/sectorspdr/tools/sector-tracker

SPDR's Bloomberg Sector Performance Pie Chart:
https://www.bloomberg.com/markets/sectors

Current Futures:
https://finviz.com/futures.ashx



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