Wall Street has sold off sharply as recession fears gripped the market after the US Treasury yield curve temporarily inverted for the first time in 12 years. All three major US indexes closed down about 3 per cent on Wednesday, with the blue-chip Dow posting its biggest one-day point drop since October. It came after two-year Treasury yields surpassed those of 10-year bonds, which is considered a classic recession signal.
Germany reported a contraction in second-quarter gross domestic product, and China’s industrial growth in July hit a 17-year low. Wednesday was the first time that yields for two-year and 10-year Treasuries had inverted since June 2007, months before the onset of the great recession, which crippled markets for years. The US yield curve has inverted before every recession in the past 50 years. The CBOE volatility index, a gauge of investor anxiety, jumped 4.58 points to 22.10.
The Dow Jones Industrial Average fell 800.49 points, or 3.05 per cent, to 25,479.42, the S&P 500 lost 85.72 points, or 2.93 per cent, to 2840.6, and the Nasdaq Composite dropped 242.42 points, or 3.02 per cent, to 7773.94. Over 300 of the S&P 500’s components are down 10 per cent or more from their 52-week highs, according to Refinitiv data.Morning-Market-Note-Thursday-15th-August