Dow futures are stable in day trading following Wednesday's major route
Traders working on the floor of the New York Stock Exchange, August 13, 2019.
Eduardo Munoz | Reuters
Stock futures stabilized after opening overnight. The slightly changed trade follows the Dow Jones Industrial Average's worst day of Wednesday amid a downturn from the bond market.
Dow futures opened about 32 points Wednesday night, but then climbed back to about little changed. The stock market took a huge hit in the previous session, with Dow dropping 800 points in its fourth-largest drop ever to a two-month low. Dow's fall of 3% was the worst this year. The S&P 500 also fell almost 3%.
The huge sale case was triggered by a bond market phenomenon on Wednesday where the return on the benchmark portfolio for 1[ads1]0-year Treasury broke short below the 2-year yield. The inversion of this central part of the yield curve has been a reliable indicator of economic downturns. As of Wednesday evening, the curve was no longer reversed.
"The 2-10 inversion sends a massive negative signal that stocks are hard to ignore," said Adam Crisafulli, CEO of JP Morgan, in a note Wednesday.
Weak economic data around the world also fueled concern that the global downturn could tip the US economy into a recession. China's industrial production growth slowed to 4.8% in July from a year earlier, the slowest growth of 17 years. Germany also had negative GDP pressure, while growth in the eurozone also slowed down faster than expected.
Investors remained on edge about US-China trade tensions. President Donald Trump in a tweet after the bell on Wednesday linked the trade match to the increasingly violent protests in Hong Kong, which further complicated the trade issue. But he also suggested a personal meeting between him and Chinese President Xi.
This week, Trump decided to postpone the tariff on certain Chinese goods while directly removing some items from the customs list, a move to avoid a negative impact on holiday shopping season. The announcement sent Dow over 300 points Tuesday. These gains were lost in the big sale on Wednesday.
The postponement "helps China more than us, but will be reciprocated," Trump said Wednesday.
