USA stocks veer lower in latest bout of market volatility

USA stocks veer lower in latest bout of market volatility

USA stocks suffered the worst day of the year Wednesday as bond market flashed a warning sign of recession.

What does that mean? .

Analysts view both bonds as a key indicator in USA economic health, and some expressed concern Wednesday the losses might indicate a coming recession.

The rug was pulled out from under USA stocks on Thursday, with the Dow dropping sharply to breach key technical levels as worries over a global recession were stoked by a worrying signal in bond markets. The yield curve shows how much it costs to borrow over the short term compared to the long term. "Going forward, we have an inverted yield curve because everyone else has negative rates".

The most watched elements of the yield curve are the yields on two-year and 10-year bonds.

Such an inversion, considered a classic recession signal, occurred last in June 2007 when the USA sub-prime mortgage crisis was gathering pace US2YT=RR US10YT=RR. Drops like this are typical for stocks, and they're the price investors have had to pay for better long-term returns than bonds historically.

When yields on some shorter-term bonds rise above those on longer bonds - as is now the case - it has historically signaled a pending recession.

"The bond market is saying central banks are behind the curve", Marc Ostwald, global strategist at ADM Investor Services in London, said in remarks cited by Bloomberg. It was the first time the 10-year yield was below the 2-year yield since 2007 - just before the Great Recession.

The Hang Seng Index in Hong Kong and China's Shanghai Composite Index also dropped at market open.

Former Federal Reserve Chairwoman Janet Yellen has sought to assure the public that the indicator doesn't necessarily mean a recession. The government's choices about which bonds to sell could cause an over-supply or under-supply in some parts of the yield curve, which in turn could invert the curve.

China called on the United States to meet it halfway on a potential trade deal as U.S. President Donald Trump said any pact would have to be on America's terms.

"It could be different this time", Carlson said.

Graf said the backdrop now was not a "perfect apples to apples comparison" to the last curve inversion episode, which happened just over a year before the collapse of Lehman Brothers sent the world economy into a tailspin.

Fed officials cut the benchmark interest rate by 0.25 percentage points last month, the first rate cut since December 2008. Major U.S. stock indexes were down about 2%. It marked the first time since 2007 that 10-year bond yields fell below 2-year yields.

A bond is a promise to make certain payments in the future, usually a large one when the bond "matures" and smaller ones in the interim, typically every six months. The spread is widely used as a gauge to study the yield curve.

"The yield curves are all crying timber that a recession is nearly a reality and investors are tripping over themselves to get out of the way as economic recession hurts corporate earnings and stocks can drop as much as 20 per cent", said Chris Rupkey, chief financial economist at MUFG Union Bank.

"The reality is that central banks around the world are responding to a diminished outlook, looking to cut rates and ease financial conditions, so basically it means the Fed's not cutting rates in a vacuum", said Jon Hill, an interest rate strategist at BMO Capital Markets in NY. No recession occurred in 1966, even though there had been an inversion.

Related Articles

  • Manchester City vs Tottenham | Clash of two ideologies

    Manchester City vs Tottenham | Clash of two ideologies

    City had won all of their last 15 Premier League matches before this weekend after thrashing West Ham 5-0 on the opening weekend. Premier League fantasy: Sign up now! Man City dominated the game and Spurs had two shots on target and scored with both of them.
    The body of Nóra Quoirin claimed by family

    The body of Nóra Quoirin claimed by family

    A post-mortem examination found she died from internal bleeding, thought to be caused by prolonged hunger and stress . She was estimated to have been dead two or three days and not more than four when her naked body was found, he said.
    UEFA Super Cup Preview: Chelsea vs Liverpool

    UEFA Super Cup Preview: Chelsea vs Liverpool

    Revelling in the creative role, the No.14 chipped in with four more assists and a goal during the last 10 games of the season.
  • Microsoft Delivers Patch Tuesday Updates for Windows 10

    Microsoft Delivers Patch Tuesday Updates for Windows 10

    Today, Microsoft announced two new Bluekeep like vulnerabilities that it has patched- CVE-2019-1181 and CVE-2019-118 . Microsoft revealed that it has discovered two new security flaws in its Windows Desktop Services package.
    US stock indexes end mostly higher after volatile day

    US stock indexes end mostly higher after volatile day

    Hussein Sayed, chief market strategist at broker FXTM said "the countdown to a recession" had started. Besides Walmart's surge, Procter & Gamble rose 1.4 percent and Coca-Cola gained 1.7 percent.
    Emery confirms Ozil and Kolasinac are 100% ready for Arsenal return

    Emery confirms Ozil and Kolasinac are 100% ready for Arsenal return

    When asked whether footballers need to have private security, Emery said: "The club is working and helping them about that". Ceballos, Nelson, Willock, Torreira, will they play?. "I respect their team a lot and I respect their coach a lot".
  • Hong Kong riot police deployed to chase down protesters

    Hong Kong riot police deployed to chase down protesters

    We're not doing anything wrong. " We [have] still got a very vivid memory of the Tiananmen Square ". Dozens of army-green armored carriers and trucks were parked inside and outside the facility.
    Jeffrey Epstein kept painting of Bill Clinton in drag at his house

    Jeffrey Epstein kept painting of Bill Clinton in drag at his house

    At the time of Jeffrey Epstein's reported suicide, "Clinton kill list" began trending on all forms of social media. Later, when asked if Clinton was lying, Sarnoff said, "Yes, I'm saying, sadly, that he is not telling the truth".
    Another Facebook practice is raising privacy concerns

    Another Facebook practice is raising privacy concerns

    The policy does mention " vendors and service providers who support our business " by "analysing how our products are used". Above the "No" and "Yes" buttons, Facebook describes the option: "Display text of voice clips you send and receive".
  • Adrian doubtful for Liverpool after being injured by celebrating fan

    Adrian doubtful for Liverpool after being injured by celebrating fan

    Four minutes before the halftime whistle, Salah received the ball behind the Saints' defence, however, his shot went over the bar. We controlled the game, we were fluent, all that stuff and then with the long balls and set-pieces Southampton came up then.
    Liam Hemsworth

    Liam Hemsworth "Heartbroken" Over Miley Cyrus Kissing Kaitlynn Carter

    Just a quick note to say that Miley and I have recently separated and I wish her nothing but health and happiness going forward". As for Carter, she broke up with Brody Jenner just days before Cyrus and Hemsworth announced their separation.
    AT&T, T-Mobile To Fight Robocalls by Verifying Legitimate Calls

    AT&T, T-Mobile To Fight Robocalls by Verifying Legitimate Calls

    The hope is that other carriers in the U.S. will also join up in the SHAKEN/STIR cross-support, and extend authentication too. As a result, customers will be able to tell on their phone's caller ID whether an incoming call is suspicious or not.