Stocks plunged on Wednesday, giving back Tuesday’s solid gains, after the U.S. bond market flashed a troubling signal about the U.S. economy. The Dow Jones Industrial Average dropped 800.49 points or 3.05% to 2,5479.42, its biggest point decline of the year and fourth largest point drop of all time. The S&P 500 fell 85.72 points or 2.93% to 2,840.6, while Nasdaq Composite declined 3.02% to 7,773.94. The Dow has given up the entire rebound from a sell-off earlier in the month.
The yield on the benchmark 10-year Treasury note on Wednesday broke below the 2-year rate, an odd bond market phenomenon that has been a reliable indicator of economic recessions. Investors, worried about the state of the economy, rushed to long-term safe haven assets, pushing the yield on the benchmark 30-year Treasury bond to a new record low on Wednesday.
Bank stocks led the declines as it gets tougher for the group to make a profit lending money in such an environment. Bank of America and Citigroup fell 4.69% and 5.28% respectively, while J.P. Morgan also dropped 4.15%. The S&P 500 Financials Sector dipped into correction territory on an intraday basis.