Market ReportWALL STREET

Dow nearly turns positive at close, but Wall Street can't shake yield curve blues

Investors are reacting to an inverted yield curve that's sounding recession alarm bells

Investors were wary of 10-year Treasury rates, which continue to trade below their three-month counterparts

The Dow edged into positive territory Wednesday, buoyed by gains from Boeing Co (NYSE:BA) and Apple Inc (NASDAQ:AAPL), but the blue chips couldn't quite eke out a gain at the close.

The industrial average fell as much as 200 poiints early in the session after worries over the inverted yield curve held stocks in the red most of the day. Meanwhile, the Nasdaq struggled thanks to a tech sector that lost 0.6%, as CNBC reported . 

The benchmark 10-year note yield was once again below the three-month rate, inverting the yield curve, and hit its lowest point since December 2017. Every recession going back 50 years has been predated by an inverted yield curve, with only one false signal, according to data from Reuters.

The Dow Jones Industrial Average lost 0.1% to 25,625.6. The Nasdaq dropped 0.6% to 7,643.4, while the S&P 500 shrank 0.5% to 2,805.4.

The Russell 2000 small-cap index fell 0.4% to 1,523.3.

In Europe, the FTSE ended nearly flat at 7,194.2 in London just before Prime Minister Thresa May announced she would resign if her Brexit deal is passed.

The French CAC ticked up 0.1% to end the day at 5,314.7, and the German DAX finished almost exactly flat at 11,419.

1:30 pm: Wall Street swings southward amid mounting recession worries

US markets took a turn for the worse Wednesday afternoon as investors were spooked by diminishing 10-year Treasury rates.

The yield curve remained inverted as the benchmark 10-year rate continued to trade below three-month rates and hit its lowest point since December 2017. Friday marked the first inversion of the yield curve since 2007, and every recession within the last 50 years has been preceded by such an inverted curve, per Reuters data.

The Dow Jones Industrial Average lost 0.3% to 25,583.2, the Nasdaq dropped 0.7% to 7,636.2 and the S&P 500 shrank 0.5% to 2,803.8.

The Russell 2000 small-cap index fell 0.7% to 1,517.6.

10:23 am: Wall Street struggles to square a dropping trade deficit with an inverted yield curve

Stocks were mixed after the open Wednesday as investors grAppled with better-than-expected trade data and a disconcerting yield curve.  

The US trade deficit fell to $51.15 billion in January, much farther than a forecasted $57 billion, according to CNBC. The nearly 15% drop is the steepest since March 2018 and was driven primarily by decreasing imports from China.

Investors are also monitoring Treasury yields. The benchmark 10-year rate hit its lowest point since December 2017 and continued to trade below the three-month rate, farther inverting the yield curve. On Friday, the yield curve inverted for the first time since 2007, an indicator that has historically been predictive of a coming recession. The yield curve has inverted before each recession in the last 50 years with only one false positive, according to data from Reuters.

The Dow Jones Industrial Average rose 1% to 25,690.7, the Nasdaq lost 6 points to 7,684.6 and the S&P 500 grew less than 1 point to 2,819.2.

The small-cap Russell 2000 index fell 0.4% to 1,522.7.

In Europe, the London FTSE advanced 0.1 to 7,203.3, the French CAC gained 0.3% to 5,316.2 and the German DAX was up 0.2% to 11,443.4.

7:59 am: Wall Street set to join Europe to head lower as markets are rudderless

US stocks are on course to fall at the New York bell after a mixed session in Asia and as European indices are also seeing red.

Wall Street was buoyed on Tuesday as traders were optimistic on China/US trade talks this week and there was less anxiety over the bond market.

The Dow Jones Industrial Average finished ahead by around 140 points at 25,657, while the Nasdaq added nearly 54 points. The S&P 500 gained around 20 to stand at 2,818. Up in Toronto, the TSX finished up over 89 points at 16,155.

But in US futures trade Wednesday, the Dow Jones is 72 points lower; the Nasdaq is off eight and the S&P 500 is around five points lower.

Meanwhile, in corporate America, plane maker Boeing Co (NYSE:BA), along with the wider airline sector will be in focus later on Wednesday as top federal aviation officials will appear in Congress to answer questions on aircraft safety.

On March 10, a Boeing 737 Max 8 airplane crashed in Ethiopia, killing 157 people. Boeing shares are down 0.82% to $367.35 in pre-market trade at the time of writing.

It comes too as Southwest Airlines Co (NYSE:LUV) warned that the 737 Max groundings are hurting its flight sales. Reportedly, it has canceled 9,400 flights because of weather, its dispute with mechanics and Boeing's grounding of the 737 Max.

Brexit continues to dominate in Europe, as Parliament bids to take control of the process from the government. The FTSE 100 is down around 29 points at 7,167, the German DAX is also off around 29 at 11,391.

In Asia, shares were mixed. The Nikkei 225 in Japan finished down around 49 and the Shanghai Composite Index gained 25 points at 3,022.

James Hughes, market analyst at London-based Axitrader, said: "Fresh losses for Boeing are contributing to the Dow’s underperformance when compared to the S&P and after a mixed session in Asia, there really is a dearth of fresh direction out in the market right now."

He added: "The economic calendar for the day ahead looks rather muted, too, with limited high profile economic data scheduled for publication, again making direction difficult to call in the near term. Looking slightly further ahead, tomorrow’s revision to Q4 US GDP data may reignite discussion over the need for a rate hike with a downward amendment being forecast here.

"That spread between the two year and five year treasury notes will remain worth watching as further growth of the inversion could again convince markets that the time for Fed intervention is nearing."

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