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.
At the close, the S&P 500, Nasdaq Composite and Dow were all off 3%.
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. An inverted yield curve suggests investors were unwilling to commit money for longer-term investments.
The 10-year yield closed at 1.595%, while the 2-year yield was at 1.589%. That the yields were so close only added to the worries about the economy.
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.
At the same time, 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 to 2% to 2.25% in the face of bitter criticism from President Donald Trump, who has continued to bash the central bank, even Wednesday. The Fed is expected to cut rates again at its meeting in mid-September.
None of the Dow stocks were higher, although Coca-Cola (NYSE:NYSE:KO) and Walmart (NYSE:NYSE:WMT), both classic defensive stocks, were off only slightly. Boeing (NYSE:NYSE:BA), Apple (NASDAQ:NASDAQ:AAPL), Goldman Sachs (NYSE:NYSE:GS), JPMorgan Chase (NYSE:NYSE:JPM) and 3M (NYSE: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:NASDAQ:AMZN), Cisco Systems (NASDAQ:NASDAQ:CSCO) and Tesla (NASDAQ:NASDAQ:TSLA) were all off at least 3%.
Energy, communications services (which includes Facebook and Google parent Alphabet (NASDAQ:GOOGL), and financial stocks were the weakest sectors. Real estate and utilities were only slightly lower because of falling interest rates.
Stocks globally were lower with stocks in Germany and France off more than 2% and Brazil's Bovespa index down more than 3%.
Oil prices were lower, with West Texas Intermediate crude futures down $1.87 to $55.23 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.