Stocks plunged dramatically Wednesday, raising recession worries, after gaining on Tuesday. The decline was blamed on troubles in the U.S. bond market instead of the recent concerns over trade differences between the U.S. and China.
The Dow Jones Industrial Average dropped 800 points, just over 3%, to 25,479, its biggest point decline of 2019. The Nasdaq Composite, heavy with semiconductor stocks, declined by 3% as well.
The yield on 10-year Treasury notes dropped below the 2-year rate briefly on Wednesday in what economists call a “yield curve inversion.” That kind of pattern has been a reliable indicator of economic recessions. Bank stocks dropped in the 4% to 5.3% range as a result.
Semiconductor stocks also dropped, with AMD down nearly 2% and Intel down more than 2%. Apple stock dropped nearly 3% on Wednesday after gaining 4% on Tuesday.
President Donald Trump blamed the Federal Reserve and Chairman Jay Powell in tweets calling them “clueless.” At the same time, the president tweeted “we are winning, big time, against China…China is not our problem, though Hong Kong is not helping. Our problem is with the Fed.” He said the Fed has been too slow to cut interest rates.
On Tuesday, the U.S. decided to delay tariffs on certain Chinese goods such as smartphones and laptops, prompting a big climb in stocks. President Trump said that delay was intended to avoid any impact on holiday shopping.
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In addition to the yield curve inversion, China posted official data Wednesday that showed its industrial output had slowed to the weakest level in 17 years.