Dive day: Dow drops 800 points, S&P falls 2.9% on recession fears
US stocks dropped between two and three percent across the board by early Wednesday afternoon. The Dow Jones Industrial Average (DJIA) was down 800 points, NASDAQ down over 240 points, and the S&P 500 dropping 85 points.
The slide was attributed to the “inverted gap” in rates for short- and long-term US Treasury bonds, which was taken as a warning that normally precedes a recession. Goldman Sachs Group led the rout of financial stocks, falling by four percent.
The inverted yield curve refers to short-term bond rates being higher than long-term ones, which is taken as a sign of investor concern about the economy. Yields on 10-year Treasury bonds have just slipped below the yields for 2-year bonds, for the first time since the 2007 run-up to the Great Recession.
US President Donald Trump described the situation as “tremendous amounts of money pouring into the United States,” adding that “people want safety!”
He also criticized the Federal Reserve for acting “far too quickly and now is very, very late.”
“The Fed has got to do something! The Fed is the Central Bank of the United States, not the Central Bank of the World.” Mark Grant @Varneyco Correct! The Federal Reserve acted far too quickly, and now is very, very late. Too bad, so much to gain on the upside!— Donald J. Trump (@realDonaldTrump) August 14, 2019
Trump’s critics have wished for a recession in order to scuttle his 2020 re-election bid, and the hashtag #TrumpRecession has already begun trending on social media.
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