Stocks finished firmly lower Wednesday, as investor sentiment was pressured by an inversion of a closely watched part of the Treasury yield curve and downbeat global economic updates. The Dow slid 800 points, while the S&P 500 lost 2.9%. The Nasdaq Composite fell 3.0%. The sell-off continued the recent trend of heightened market volatility, as the S&P 500 has now experienced an intraday move of at least 1% in eleven-straight sessions.
Perceived safe haven assets surged after Chinese industrial output fell to the lowest in 17 years and German GDP data showed the economy unexpectedly contracted during the second quarter. The news briefly sent the spread between two- and 10-year Treasury note yields into negative territory for the first time since 2007, raising investor concern as the inversion of this part of the curve has historically been a precursor to recessionary periods. The yield on the 10-year note slumped 11 basis points to 1.58%, while the yield on the two-year note slid eight basis points to 1.58%. The perceived “risk off” mentality pushed the yield on 30-year bonds to a record low of 2.01%, while COMEX gold climbed 0.9% to a six-year high of $1,515.90/ounce.
All 11 S&P 500 sectors finished in negative territory, with eight groups losing more than 2%. Energy stocks paced the declines following a retreat in oil prices. WTI crude dropped 3.5% to $55.08/barrel as concerns that a global economic slowdown would dim demand prospects. Banks weighed on Financials amid the yield curve inversion, with the sector falling 3.6%. In earnings, Macy’s slumped more than 12% after missing analyst profit expectations and lowering its full-year guidance.