Weak economic data arriving from China and Germany and a key US Treasury benchmark exacerbated global recession fears, as losses on Wall Street accelerated late on Wednesday August 14th, after it had been locked in sell-off mode earlier on the same day, AFP reported on Wednesday August 14th.
At around 15:00 GMT, the Dow Jones Industrial Average had lost 535 points, or 2.0%, sinking to 25,743.88, after it had registered about 400 points, or 1.5%, at 25,879.21, about 20 minutes into trading earlier on Wednesday August 14th.
Meanwhile, the broad-based S&P 500 Index slid 2.1% to 2,866.33, while the tech-rich Nasdaq Composite Index dropped 2.3% to 7,831.75.
The sell-off came after the yield on the 10-year US Treasury Note briefly slid below the yield on the two-year bond, a dynamic seen as a reliable indicator of recession in the coming months.
The weakest Chinese factory output data in 17 years and official German data that showed negative growth in the second quarter, subsequently led to the unprecedented decline, signalling the latest stream of weak economic data from overseas.
The Federal Reserve (Fed) cut interest rates last month for the first time in more than a decade and is expected to make additional cuts in the months ahead. As ailing economic reports have continued to fuel expectations that the leading central banks will undertake new stimulus measures.
Nonetheless, Joe Manimbo, Senior Market Analyst at Western Union Business Solutions, noted later that the so-called yield inversion signalled that the US economy could be a little more than a year away from recession.
Adding, that while others are worrying that central bankers may be low on tools to ward off recession, sinking yields are the bond market’s way of pressuring the Fed to step on the monetary gas pedal and cut interest rates, according to AFP.