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Aug 28, 2019

U.S. Market | Pre Market Update: Dow set to slide 100 points as inverted yield curve stokes recession fears

Fred Imbert, Sam Meredith



U.S. stock index futures pointed to a lower open on Wednesday after a key part of the U.S. yield curve inverted even further, exacerbating fears of an impending recession.
At around 8 a.m. ET, Dow Jones Industrial Average futures indicated a loss of 116 points at the open. Futures on the S&P 500 and Nasdaq 100 also pointed to losses at the open.
The closely watched spread between the 10-year Treasury yield and the 2-year rate fell to negative 6 basis points Wednesday. The move extended losses from the previous session when the spread registered its lowest level since 2007.
A 10-year rate below the 2-year yield is viewed by fixed income traders as an important recession prognosticator, marking an unusual phenomenon as bondholders receive better compensation in the short term. Meanwhile, the U.S. 30-year Treasury yield fell to a new record low of 1.906% on Wednesday.
Bank of America and Citigroup shares pulled back more than 1% each. J.P. Morgan Chase slid 1.1%.
Market participants were also closely monitoring trade developments between the world’s two largest economies. The ongoing U.S.-China trade dispute has placed an increasing strain on the global economy, prompting policymakers to respond with interest rate cuts and stimulus measures to bolster growth.
The White House is scheduled to impose the first stage of U.S. tariffs on $300 billion worth of Chinese goods on Sunday. China is set to respond with tariffs on U.S. products on the same day.

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