The Dow Jones Industrial Average traded 46 points lower while the S&P 500 dipped 0.2%. The Nasdaq Composite also dipped 0.2%. The three major averages traded higher earlier in the day.
Stock benchmarks traded into the red around the same time the 10-year Treasury yield went negative. The yield fell to 2.227%, near 20-month lows. The 10-year yield entered May trading above 2.5%.
Plunging yields this month, along with a yield curve inversion, have raised concerns about slowing economic growth. Investors typically see bonds as a safer alternative to riskier assets when economic worries arise.
“It definitely points to slower growth. That’s the primary driver right now in this risk-off environment we’ve experienced in the month of May,” said Ryan Nauman, market strategist at Informa Financial Intelligence, about the drop in yields. “People are rotating out of equities and into Treasurys for that defensive play.”
Bank shares followed yields lower. The SPDR KS&P Bank ETF (KBE) dropped 2.2% as Bank of America shares lost 2.5%. J.P. Morgan Chase also declined 1.4%.
The S&P 500 is down more than 5% this month and closed below 2,800 on Wednesday — a key level watched by traders — for the first time since late March.
There are “insufficient signs of bottoming” in the market, said Mark Newton, managing member at Newton Advisors, in a note. “Yet this will all take time. Until then, downside targets should take another 3-5 trading days with the 2722-35 [range] having significance for S&P. Closes back up above 2800, however, would be something to watch carefully.”
The protracted trade dispute between China and the U.S. also weighed on markets. A senior Chinese diplomat ramped up the rhetoric overnight. Also, China has halted soy purchases from the U.S., according to Bloomberg News.
Drew Angerer | Getty Images
Washington and Beijing have imposed tariffs on billions of dollars’ worth of one another’s goods since the start of 2018, battering financial markets. Earlier this month, both countries ratcheted up tensions through higher tariffs.
The higher levies pressured U.S. stocks in May, putting them on pace for their first monthly decline of 2019. Through Wednesday’s close, the S&P 500 and Dow are both down more than 5% while the Nasdaq is down 6.8%.
In economic news, the second read on first-quarter U.S. GDP showed the economy expanded by 3.1% on an annualized basis. The 3.1% print topped a Dow Jones estimate of 3%.