Major US stock indices fell significantly, as a closely monitored indicator of the US bond market indicated a renewed risk of recession after weak economic data from Germany and China.
Official data released on Wednesday showed that China's industrial output grew at its slowest pace in 17 years in July, while Germany's GDP fell 0.1% in the second quarter from the previous quarter, marking the first drop in the last three quarters. These data have returned to the focus of investors the protracted trade war between the US and China and its negative impact on global economic growth.
Against this background, the yield on 10-year treasury bonds on Wednesday was lower than the yield on 2-year bonds for the first time since 2007, which is a reliable indicator of the upcoming recession. In addition, the yield on 30-year treasury bonds reached a new record low.
Investors also evaluated the Department of Labor report, which showed that US import prices unexpectedly rose in July. According to the report, import prices rose 0.2% in July after falling by a revised 1.1% in June. Economists had predicted that import prices would remain unchanged from a sharp decline of 0.9%, which was originally reported the previous month. The report also showed an unexpected increase in export prices, which rose 0.2% in July after falling by a revised -0.6% in June. Export prices were also expected to remain unchanged from the 0.7 percent decline originally announced for the previous month.
All DOW components completed trading in the red (30 of 30). Outsiders were shares of Dow Inc. (DOW, -5.77%).
All S&P sectors recorded a decline. The largest drop was shown by the base materials sector (-3.2%).
At the time of closing:
Dow 25,479.42 -800.49 -3.05%
S&P 500 2,840.60 -85.72 -2.93%
Nasdaq 100 7,773.94 -242.42 -3.02%
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