Stocks Whipsaw Amid Recession Fears, China's Retaliation Threat
Stocks whiplashed on Thursday following Wednesday's 800-point rout. Wall Street is grappling with growing fears of a recession as well as concerns over China's threat to retaliate if the Trump administration moves forward with additional tariffs.
The Dow Jones Industrial Index lost 100 points at the open before reversing. As of 10:00 a.m., the Dow was up 0.4%, at 25,581.
The S&P 500 gained half a percent and the Nasdaq composite rose one-tenth of a percent.
On Wednesday, the Dow, reversing its gains from the previous day when the U.S. delayed some of the tariffs threatened on Chinese imports.
Investors are increasingly wary about the risks of a recession, with those fears highlighted on Wednesday when what's known as the "yield curve" inverted to its lowest levels since 2007. Considered a classic recession warning signal, anreflects investor concerns about slowing global economic growth and rising tensions due to the U.S. trade war with China.
"Continued inversion will be worrisome and top of mind as recession fears are escalating," TD Securities analysts said in a Thursday research note to clients.
When the yield on longer-term Treasury bonds falls below that of shorter-term issues, economists call that an "inverted yield curve." It suggests bond investors expect growth to slow so much that the Federal Reserve feels compelled to cut short-term interest rates to support the economy.
The yield on the 10-year Treasury dropped from 2.02% on July 31 to below 1.60%. On Wednesday, it briefly fell below the two-year Treasury's yield for the first time since 2007.
Each of the last five times the two-year and 10-year Treasury yields have inverted, a recession has followed.
Weak economic data from Germany and China has added to signals of a global slowdown. "The countdown to a recession has just started," Hussein Sayed of FXTM said in a report.