Recession fears hit Wall Street after grim China, German data

Recession fears hit Wall Street after grim China, German data

Chipmakers were also down, with the Philadelphia chip index slumping 3%.

Both 10-year and 30-year Treasury bonds, which tumbled to record lows Wednesday, stabilized with gains Friday.

Wednesday's drop comes after markets rallied Tuesday on the sudden decision by the Trump Administration to delay tariffs on cell phones, laptops and other gift items to support a healthy holiday shopping season.

USA investors dumped stocks Wednesday, sending the Dow Jones Industrial Average into its biggest one-day drop of the year, after the yield on 10-year Treasury bonds crossed a threshold that has correctly predicted many past recessions.

Significant market signals this week that warned of a possible recession rebounded from historic lows on Wall Street Friday, as did the sagging major USA indices. The inversion, a classic recession warning signal, comes amid rising tensions due to the USA trade war with China and a global economic slowdown. S&P 500 e-minis were down 25.5 points, or 0.87% and Nasdaq 100 e-minis were down 75.25 points, or 0.97%.

On Wall Street, futures for the Standard & Poor's 500 Index and the Dow were up 0.5%.

At 7:00 a.m. ET, Dow e-minis were down 239 points, or 0.91%. The Nasdaq rose 0.3% to 7,794.

Uncertainty about the outcome of the United States trade war with China has spurred a return of volatility to the stock market in August, the Dow has dropped more than 5pc and the S&P 500 is down more than 4pc. Hong Kong's Hang Seng closed up 0.8% at 25,495.46. The Nasdaq composite also lost 3%.

Traders tend to shift money to the safety of US government bonds when they're fearful of an economic slowdown.

Stock fell and demands for bonds rose as the markets interpreted Treasuries rates as a signal preceding a recession.

Still, others cautioned that while the inverted yield curve nearly always comes ahead of a recession, it doesn't say how soon an economic downturn is. Bank of America Corp, Citigroup Inc, JPMorgan Chase & Co, Goldman Sachs, Wells Fargo & Co and Morgan Stanley were all down between 1.5% and 2.4%.

The US bond market showed red flags, with two-year Treasury yields rising above those for 10-year paper for the first time since 2007, pointing to the risk of recession. The price of benchmark US crude slid 3.4%, to $55.16 per barrel. National Oilwell Varco lost 5.3%, and Schlumberger fell 5.2%.

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