US STOCKS-Dow posts biggest one-day drop since October as recession fears take hold

Reuters

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    * 2-year, 10-year Treasury yields invert for 1st time in 12
yrs
    * Germany and China report bleak economic data 
    * Dow sees biggest one-day drop since October
    * Macy's slides after cutting outlook; weighs on rivals
    * Indexes drop: Dow 3.05%, S&P 2.93%, Nasdaq 3.02%

 (Updates to market close)
    By Stephen Culp
    NEW YORK, Aug 14 (Reuters) - Wall Street sold off sharply on
Wednesday as recession fears gripped the market after the U.S.
Treasury yield curve temporarily inverted for the first time in
12 years. 
    All three major U.S. indexes closed down about 3%, with the
blue-chip Dow posting its biggest one-day point drop since
October after 2-year Treasury yields surpassed those of 10-year
bonds, which is considered a classic recession signal. 
    Dire economic data from China and Germany suggested a
faltering global economy, stricken by the increasingly
belligerent U.S.-China trade war, Brexit woes and geopolitical
tensions. 
    Germany reported a contraction in second-quarter gross
domestic product, and China's industrial growth in July hit a
17-year low.  urn:newsml:reuters.com:*:nL8N25A1D1  urn:newsml:reuters.com:*:nL4N25A0U7
    "It was all negative and not much positive today," said
Chuck Carlson, chief executive officer at Horizon Investment
Services in Hammond, Indiana. "We're outside of the earnings
season and markets are being batted around by news."
    "It's a reactionary market right now and probably will
continue to be," Carlson added. "My guess is we're probably in
for this until after Labor Day." 
    Wednesday was the first time that yields for 2-year and
10-year Treasuries had inverted since June 2007, months before
the onset of the great recession, which crippled markets for
years.  urn:newsml:reuters.com:*:nL2N25A0JK
    The U.S. yield curve has inverted before every recession in
the past 50 years.
    "It could be different this time," Carlson said. "When
you've got $15 trillion in global government debt at negative
yields, that's a new animal. 
    "Even if it is accurate in foreshadowing a recession, that
doesn't mean it's coming tomorrow," he added.
    The CBOE volatility index  .VIX , a gauge of investor
anxiety, jumped 4.58 points to 22.10. 
    The Dow Jones Industrial Average  .DJI  fell 800.49 points,
or 3.05%, to 25,479.42, the S&P 500  .SPX  lost 85.72 points, or
2.93%, to 2,840.6, and the Nasdaq Composite  .IXIC  dropped
242.42 points, or 3.02%, to 7,773.94.
    Over 300 of the S&P 500's components are down 10% or more
from their 52-week highs, according to Refinitiv data. More than
180 of those stocks have fallen more than 20% from their 52-week
highs, putting them in bear market territory.
    All of the 11 major sectors in the S&P 500 closed in
negative territory, with energy  .SPNY , financials  .SPSY , 
materials  .SPLRCM , consumer discretionary  .SPLRCD  and
communications services all falling 3% or more. 
    Interest rate-sensitive banks  .SPXBK  tumbled 4.3%.  
    Macy's Inc's  M.N  shares plunged 13.2% after the department
store operator missed quarterly profit estimates and cut its
full-year earnings estimates.  urn:newsml:reuters.com:*:nL4N25A3HF
    Rival department store operators Nordstrom Inc  JWN.N  and
Kohls Corp  KSS.N  slid 10.6% and 11.0%, respectively.
    A U.S. House of Representatives oversight panel called on
Mylan NV  MYL.O  and Teva Pharmaceutical Industries Ltd
 TEVA.TA  to turn over documents as part of a review into
generic drug price increases.  urn:newsml:reuters.com:*:nL2N25A07E
    Mylan fell 8.5% while U.S.-listed Teva shares dipped 10.5%.
    Facebook Inc  FB.O  slid 4.6% on news that the European
Union's lead regulator is investigating how the social media
company handled data during the manual transcription of users'
audio recordings.  urn:newsml:reuters.com:*:nL8N25A511
    Declining issues outnumbered advancing ones on the NYSE by a
4.44-to-1 ratio; on Nasdaq, a 5.33-to-1 ratio favored decliners.
    The S&P 500 posted eight new 52-week highs and 51 new lows;
the Nasdaq Composite recorded 23 new highs and 282 new lows. 
    Volume on U.S. exchanges was 8.68 billion shares, compared
with the 7.47 billion average over the last 20 trading days. 

 (Reporting by Stephen Culp; additional reporting by Noel
Randewich
Editing by Leslie Adler)
 ((stephen.culp@thomsonreuters.com; 646-223-6076;))

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