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Home / Business / Dow drops 500 points at lowest as 10-year government yields hit 1.60% – raises 'fear factor' of trade war

Dow drops 500 points at lowest as 10-year government yields hit 1.60% – raises 'fear factor' of trade war



U.S. stocks tumbled sharply on Open Wednesday, ceding last season's healthy rebound, and some, as a number of global central banks adopted simple monetary policies in the face of an intensifying trade dispute between Beijing and Washington.

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Dow Jones industrial average

DJIA, -2.02%

dropped almost 568 points, or 2.2%, to 25,459, the S&P 500 Index

SPX, -1

.68%

lost 54 points, or 1.9%, at 2,826. Meanwhile Nasdaq Composite Index

COMP, -1.47%

cast 1.6% to 7,705, a drop of 128 points.

On Tuesday, the Dow rose 311.78 points, or 1.2%, to end at 26,029.52, while the S&P 500 index climbed 37.03 points, or 1.3%, to close at 2,881.77. , while the Nasdaq Composite Index

COMP, -1.47%

increased 107.23 points, or 1.4%, to finish at 7,833.27.

What is driving the market?

It seemed that stock markets would fall at the beginning of trading on Wednesday, with shares giving up gains as US government bonds and European government bonds sank new notes. The 10-year Treasury

TMUBMUSD10Y, -5.42%

fell below 1.70%, falling to an intraday rate of 1.60%, around the lowest since the end of 2016, while comparable German bonds

TMBMKDE-10Y, -12.71%

hit a record low of negative 0.59%.

“A sharp decline in returns as the 10-year note falls below 1.65%. This raises the 'Fear Factor' over the impact of the trade war on the economy, "Peter Cardillo, chief economist at Spartan Capital Securities, told MarketWatch.

Adding to market jumpers, the fear of a recession in the United States is growing against a weakening economic backdrop across the globe.

The central banks of India and New Zealand (as well as Thailand) lowered their domestic interest rates to levels lower than expected, highlighting concerns centered on the health of the world economy.

India's central bank cut its key policy rate for the fourth time in a row, reducing the repo rate by 0.35% to 5.40% to boost the economy, while New Zealand's central bank cut its benchmark rate to an all-time low of 1% on Wednesday.

For another day in a row, the People's Bank of China set the official mid-point reference for the yuan to 6.9996 in Asian hours, but the level is approaching the key level of 7, much seen as a line in the sand for the currency. The PBOC fixes the currency daily and allows it to move up to 2 percentage points on each side of the midpoint.

A breach at this level on Monday, interpreted by some as a deliberate depreciation of the currency, helped fuel global sales of equities and decline in bond yields, but markets have so far stabilized, despite the prospects of an uncertain timeline for a Sino-US trade resolution.

Losses for the stock index future before the opening bell on Wednesday accelerated after President Donald Trump tweeted that the US's "problem is not China – We are stronger than ever, money is flowing into the United States while China is losing companies by thousands to other countries, and their Currency is under siege – Our problem is a Federal Reserve that is too ….. proud to admit their mistake of trading too fast and tightening too much (and that I was right!).

The President said that the central bank "must cut interest rates bigger and faster and stop their ridiculous quantitative tightening NOW," he tweeted:

Read: Why a falling Chinese yuan shattered the stock market and intensified the trade war [19659007] : Why can't the "tail risk of a currency war" be ruled out as tensions in the US and China increase

Which stocks are in focus?

Walt Disney Co. .

DIS, -6.33%

on Tuesday said the beginning of November 12, when the entertainment giant's ambitious streaming service debuts, US consumers will be able to subscribe to a streaming bundle with Disney +, ESPN + and advertising-backed Hulu for $ 12.99 a month. Disney shares fell 6.5% l after missing earnings estimates.

Lumber Liquidators Holdings Inc .

LL, -16.26%

reduced the outlook for full-year comparable stores to "approximately flat." .

CVS, + 5.74%

rose 5.1% Wednesday after the pharmacy chain reported revenue that exceeded Wall Street expectations.

Office Depot Inc. & # 39; s warehouse

ODP, -7.43%

rose 0.9% after the retail supply business reported revenue in the second quarter that beat expectations.

Read: September rate cut 'fully priced', with Trump tariff tweets seen pushing the Fed to take more steps

What other assets are in focus?

Gold for delivery in December

GCZ19, + 1.84%

charged for a fourth straight gain, breaking a psychological level above $ 1500 per ounce.

Oil futures sank. US oil prices

CLU19, -3.56%

fell 2.9% to $ 52.08 a barrel, after winning 1.9% on the New York Mercantile Exchange on Tuesday.

In Asia, Japan's Nikkei 225 Index

NIK, -0.33%

falls 0.3%, Hong Kong's Hang Seng Index

HSI, + 0.08%

HSI, + 0.08%

ended practically unchanged, falling below 0.1%, while the CS1 300 index

000300, -0.41%

falls 0.4% .

The Pan-European Stoxx 600

SXXP, -0.15% ,

meanwhile, 0.4% lowered Wednesday, giving up a strong early gain.


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