US stocks plummeted by nearly 400 points on Monday as bond yields resumed their downward spiral this week, further contributing to the market’s growing weeks-long volatile streak.
Trading closed Monday with the Dow Jones Industrial Average falling 391 points and the S&P 500 down by 35.96 points. The Nasdaq plummeted by 95.73 points.
CNBC reported that the benchmark 10-year US Treasury yield, which hit its lowest last week since 2016, dipped to a low 1.63%. It further noted that the difference between a two-year and 10-year yield slimmed down to only about six basis points.
Neil Dwane, a global strategist at Allianz Global Investors, explained to the Wall Street Journal ahead of Monday’s trade closing that if yields “keep edging down,” the bond market will, in turn, begin to signal the onslaught of “one mother of a recession.”
Analysts have also indicated that US stocks are being hurt by intensifying protests in Hong Kong, which caused the Hang Seng Index to dip by 0.4% after demonstrations forced the semi-autonomous city’s airport to cancel more than 100 flights.
“Hong Kong is clearly an important bellwether for just how far China is willing to exert its influence,” Matthew Cairns, a senior rates strategist at Rabobank, told the Journal. “This is a clear show of Chinese strength, and I don’t think, just as we are seeing in the trade war, that China will be willing to allow overt breaches of its authority within the region and that clearly is having pretty negative effect in terms of the Hang Seng.”
The Dow’s fall this week marks yet another downturn for traders, coming off a week of ups and down in regards to the ongoing US-China trade war. Previously the Dow fell by 333.75 points after the US Federal Reserve opted to cut interest rates, and then it again fell by 767 points after China allowed the yuan’s exchange rate to hit an 11-year low, a move which subsequently led to the US Treasury Department labeling China a “currency manipulator.”