As if investors need another thing to worry about, it looks like market volatility will continue for another day. Wednesday was the worst day for markets of 2019.
Despite a healthy US economy and relatively strong corporate earnings, three dark clouds have intermittently loomed over the American stock market over the past year and a half: The global economic slowdown, the trade war and spooky warning signs in the bond market.
All three of those bad omens have now converged.
Dow (INDU) futures are pointing to a 200-point loss at the open. S&P 500 (SPX) futures were 0.6% lower. Futures of the Nasdaq (COMP), a barometer for the tech industry, sank 1%. Tech companies would be particularly hurt by a trade war escalation.
On Thursday, the Chinese Ministry of Finance said it would “take necessary countermeasures” after the United States earlier this month announced a new 10% tariff on $300 billion in Chinese goods. China said the new tariffs “seriously violated the consensus” Presidents Donald Trump and Xi Jinping agreed to at the G20 meeting earlier this year.
China has previously said it would retaliate to any new tariffs tit for tat, but the statement nonetheless spooked markets. Dow futures had been up about 200 points and gave up all their gains, and then some.
More signs of the global economic slowdown emerged Thursday, as China injected $2.4 billion in stimulus into the Hong Kong economy, according to Bloomberg. The Hong Kong protests have hurt the tourism economy. The airport — the only way in or out of Hong Kong — has been shut down after protesters barricaded themselves inside.
Wednesday, the yield curve between the 10-year and 2-year Treasury bonds inverted. That classic recession signal scared investors, who emptied riskier stocks out of their portfolios and plunged more money into the safety of government-backed bonds.
Although the 2/10 yield curve has reverted, Treasury yields, which move in opposite direction to bond prices, continued to plunge Thursday. The 30-year yield tumbled below 2% for the first time in history. The 2-year and 10-year yields remain very close and both are below 1.53%.
The Dow plunged 800 points and the broader stock market fell about 3% Wednesday.
— CNN’s Serenitie Wang contributed to this report.
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