US Markets

Wall Street tumbles on growing recession fears

Credit: REUTERS/BRENDAN MCDERMID

Wall Street main indexes slumped more than 2.5% on Wednesday, as a closely watched U.S. bond market indicator pointed to a renewed risk of recession following poor economic data from Germany and China.

By Medha Singh and Arjun Panchadar

Aug 14 (Reuters) - Wall Street main indexes slumped more than 2.5% on Wednesday, as a closely watched U.S. bond market indicator pointed to a renewed risk of recession following poor economic data from Germany and China.

The S&P 500 index has now sunk 4.5% since President Donald Trump announced a fresh round of tariffs on Chinese imports at the start of August and is on course for its worst three-week percentage slide this year.

A brief recovery on Tuesday on signs that Washington would delay some of those moves quickly evaporated on Wednesday morning.

Yields on two-year Treasury notes rose above the 10-year yield for the first time since 2007, a metric widely viewed as a classic recession signal, spooking investors. US/

The interest-rate sensitive bank subsector .SPXBK plunged 4.3%, while the broader financial sector .SPSY fell 3.5%, putting them on course for their biggest one-day percentage fall this year.

"The bond market is the one that seems to be leading, the stock market is just kind of following at this point. That tells you we are in a headline market where investors will react quickly to what the flavor of the day is," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

"If you look at the U.S. fundamentals right now, growth is decent and earnings have been good and that supports stock market at this level."

Adding to grim mood was data showing Germany's economy contracted in the second quarter, while Chinese industrial output growth cooled to a more than 17-year low in July.

The CBOE Volatility index .VIX, also known as Wall Street's "fear gauge", rose 5.2 points to 22.71.

Eight of the 11 major S&P sectors shed more than 2%. Only the defensive utilities .SPLRCU sector was higher, while consumer staples .SPLCS and real estates .SPLRCR posted the smallest losses.

At 13:04 p.m. ET, the Dow Jones Industrial Average .DJI was down 709.51 points, or 2.70%, at 25,570.40, the S&P 500 .SPX was down 79.36 points, or 2.71%, at 2,846.96. The Nasdaq Composite .IXIC was down 239.60 points, or 2.99%, at 7,776.76.

The energy sector .SPNY shed 3.9% as oil prices slumped on demand worries. O/R

Shares of Apple Inc AAPL.O were down 2.7% after boosting markets a day earlier with a 4% rise. Chipmakers were also down, with the Philadelphia chip index .SOX slumping 3.4%.

The biggest decliner on the S&P 500 index was Macy's Inc M.N, down 14.6%, after the department store operator cut its full-year profit forecast as it discounted heavily to clear excess spring season inventory.

Rivals Kohl's Corp KSS.N, Target Corp TGT.N and Nordstrom Inc JWN.N slipped between 3.2% and 10.8%.

Declining issues outnumbered advancers for a 4.97-to-1 ratio on the NYSE and for a 5.64-to-1 ratio on the Nasdaq.

The S&P index recorded eight new 52-week highs and 51 new lows, while the Nasdaq recorded 14 new highs and 221 new lows.

(Reporting by Medha Singh and Arjun Panchadar in Bengaluru; Editing by Anil D'Silva)

((Medha.Singh@thomsonreuters.com; within U.S. +1646 223 8780, outside U.S. +91 80 6749 1130; Twitter: https://twitter.com/medhasinghs))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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