US stocks crash after bond market flashes strong recession warning

FILE PHOTO: Traders at the New York Stock Exchange (NYSE) © Reuters / Eduardo Munoz / Free

US markets opened in the red on Wednesday, with the Dow Jones Industrial Average losing more than 400 points, after the US bond market sparked new fears about a looming recession.

After Tuesday’s gains on the decision to postpone tariffs on Chinese imports, US stocks saw another huge selloff. The Dow was down around 1.5 percent, while S&P 500 fell 1.4 percent to 2.885.42 points. The Nasdaq Composite dropped 1.55 percent to 1.892.23 points after the opening bell.

The sharp decline occurred after the yield on the benchmark 10-year Treasury note dipped below the 2-year rate on Wednesday. Such a situation is called a yield curve inversion, which is a strong indicator for economic recessions. A similar picture preceded every recession over the past 50 years.

Ahead of the last recession, the yield curve inverted briefly in December 2005, about two years before the financial crisis hit.

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