Dow falls 200 points as yields dip amid persisting economic fears

Release Date:  Wednesday, March 27, 2019

CNBC, By: Fred Imbert and Sam Meredith, March 27, 2019

Stocks fell on Wednesday, tracking bond yields, as worries over a possible economic slowdown lingered.

The Dow Jones Industrial Average traded 208 points lower. The S&P 500 and Nasdaq Composite declined 1 percent and 1.3 percent, respectively.

Earlier in the day, the major averages traded higher on better-than-expected trade data. The U.S. trade deficit fell to $51.15 billion in January, much more than was expected and could give a boost to this quarter’s GDP.

The benchmark 10-year rate traded at 2.359 percent and hit its lowest level since late 2017. Investors are keeping an eye on rates after the 10-year fell below the 3-month rate last week for the first time since 2007. It is a development that investors call an inverted yield curve and is seen as an early indicator of a recession.

The U.S. Treasury yield curve has inverted before each recession in the past 50 years and has only offered a false signal just once in that time, according to data from Reuters.

Yields fell on Wednesday after Stephen Moore, who is expected to be nominated to the Federal Reserve Board of Governors, called for the central bank to cut rates by half a percentage point. Moore made his remarks in an interview with The New York Times, noting he is not a “dove” or a “sycophant” for President Donald Trump.

Investors have been piling into Treasurys amid the release of weaker-than-expected economic data. The disappointing data have stoked fears that economic growth may be slowing down.

Chinese industrial profit suffered their biggest drop since 2011 in the first two months of the year, falling 14 percent year to date. Data released Tuesday showed consumer confidence slipped for the fourth time in five months.

Wall Street’s main indexes registered solid gains in the previous session, but finished below their session highs in a reflection of the underlying concerns about the economic outlook.

“We need global growth to stabilize to help propel stocks higher from here,” Tom Essaye, founder of The Sevens Report, said in a note. “The currency and bond markets continue to flash large and bright ‘caution’ signs on this market, and until bond markets start ‘acting’ better, I think it’ll be hard for stocks to sustainably rally.”

Shares of WellCare Health Plans surged more than 10 percent after announcing it would sell itself to Centene for $15.27 billion in a cash-and-stock deal. Centene shares, meanwhile, dropped 9 percent.

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