The Dow Jones Today Is Tethered by an Inverted Yield Curve

The Dow Jones today is flat despite a big day of earnings, thanks to an inverted yield curve signaling recession. Thirty-year U.S. Treasury bonds have also met historic lows.

Yesterday (Wednesday) was the Dow's single worst session of 2019, an 800-point loss.

Here are the numbers from Wednesday for the Dow, S&P 500, and Nasdaq:

Index Previous Close Point Change Percentage Change
Dow Jones 25,479.42 -800.49 -3.05
S&P 500 2,840.60 -85.72 -2.93
Nasdaq 7,773.94 -242.42 -3.02

Now, here's a closer look at today's Money Morning insight, the most important market events, and stocks to watch.

The Top Stock Market Stories for Thursday

  • This morning, U.S.-China trade is back in the headlines. Following Wednesday's 800-point rout, U.S. President Donald Trump has proposed a "personal meeting" between Chinese President Xi Jinping and himself. Trump suggested a meeting over Twitter to discuss the ongoing geopolitical crisis in Hong Kong, where hundreds of thousands of residents have protested a bill that would allow extradition to mainland China.
  • Wednesday's trading session saw the two-year Treasury bond tick above the 10-year Treasury bond. The "2-10" yield inversion is viewed as a negative signal for an economy and has historically suggested that a recession is on the horizon. That said, President Trump and his economic advisor Peter Navarro both blasted the Federal Reserve for its failure to provide greater support and lower interest rates for the American economy. With markets around the globe in a panic, investors moved enough money into U.S. bonds that they drove the 30-year Treasury bond to an all-time low. Despite the 30-year bond falling under 2%, U.S. debt is still paying a more attractive rate than many other economies at the same maturity. The Japanese government's 30-year bond sits at just 0.15%, while the German bund pays a rate of -0.20%.

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  • Oil prices continued to drop as concerns about a recession mixed with a surprise uptick in U.S. inventory levels. The Energy Information Administration reported that U.S. crude stocks increased by 1.6 million barrels last week. Analysts had expected a decrease of 2.8 million barrels. Ongoing worries about tariffs, weak economic data from Europe and China, and the recent yield inversion are pushing prices lower as well. WTI crude was off 1% to fall under $55 per barrel, while Brent crude dipped another 1.3% to $58.70.

Stock to Watch Today: WMT, M, AMZN, BABA, BRK.A

  • Shares of Walmart Inc. (NYSE: WMT) are in focus as the global retail giant reports earnings before the bell today. Retail stocks were absolutely pummeled Wednesday after Macy's Inc. (NYSE: M) reported dismal earnings and slashed its forward guidance. Investors in Walmart will look to determine if the company is keeping up with its rival Inc. (NASDAQ: AMZN) on e-commerce sales.
  • Alibaba Group Holding Ltd. (NYSE: BABA) will also report earnings before the bell Wednesday. The Chinese e-commerce giant is expected to report a small downturn in revenue growth. The bigger question for the company, however, is whether its Hong Kong IPO will face any headwinds (or outright cancellation) due to the Special Administrative Region's ongoing political unrest.
  • Inc. (NASDAQ: AMZN) received a boost of confidence after Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK.A) announced it had increased its stake in the e-commerce giant by 11% in the second quarter. Warren Buffett's shop now owns 537,700 shares that were worth $1.02 billion at the end of the June quarter.
  • Look for additional earnings reports from Nvidia Corp. (NASDAQ: NVDA), Applied Materials Inc. (NASDAQ: AMAT), Tapestry Inc. (NYSE: TPR), Madison Square Garden Co. (NYSE: MSG), Canadian Solar Inc. (NASDAQ: CISQ), and Dillard's Inc. (NYSE: DDS).

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