The bond market signaled the strongest recession warning yet Wednesday morning.
The Dow Jones Industrial Average dropped more than 540 points during morning trading, and the yield on the U.S. 30-year Treasury note fell to a record low, The Wall Street Journal reported. By midday trading, the Dow dropped more than 650 points. This inversion of the "yield curve" has happened before every recession in the last 50 years, according to The Washington Post.
The last inversion of this part of the yield curve happened in December 2005, two years before a recession.
“Whether we go into recession now or we don’t, it’s not a good sign,” Michael Farr, president of investment firm Farr, Miller & Washington, told the Journal. “You’re going to see investors temper their enthusiasm more seriously today.”
The S&P 500 index and the Nasdaq composite also dropped more than 1 percent Wednesday.
The yield curve inversion comes one day after President Trump's decision to delay tariffs on some Chinese goods until Dec. 15 -- the tail end of the holiday shopping season. This move reflects mounting fears that the trade war could derail the U.S. economy, according to The Hill.
"We've never faced a recession with so much debt and so little Fed ammunition available and with negative rates still in effect in many places," tweeted market strategist Sven Henrich. "There's no playbook for this. Historic data will be of little use."
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