Stock market drops amid recession fears

NEW YORK CITY (NBC) – There was a massive sell off Wednesday on Wall Street.

The Dow plunged 800 points and NASDAQ fell 3% following reports overseas economies are beginning to slow down.

It was a brutal day for investors and a crazy day on Wall Street, all because of an arcane movement in the markets called an “inverted yield curve.”

In simple terms this is what happened: the yield on the ten-year Treasury note dipped below the yield of the two-year Treasury note.

What does that mean? Broadly speaking, when interest rates are going up, it means the markets are expecting stronger economic growth. When they go down, the market is expecting weaker growth. And that’s what happened Wednesday morning.

In fact, the yield on the 30-year Treasury bond hit an all-time low.

Why is this happening now?  Our economy looks fine and it is but economies overseas are slowing down. Investors got two reports Wednesday morning. One said China’s economy has slowed way down. The other said Germany’s economy may already be in recession.

So our stock market spent the day lowering its expectation for global economic growth.

The feeling is if China and Germany slowing down, chances are our economy won’t be far behind.

At the close, the Dow Jones Industrial Average was down more than 800 points.

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