NEW YORK, NY - The Dow Industrial Average sank 800 points Wednesday after the bond market, for the first time in over a decade, flashed a warning signal that has an eerily accurate track record for predicting recessions.
It marked the largest drop of the Dow this year.
The S&P 500 also fell by more than 85 points and the Nasdaq slid by more than 240 points.
The big development fueling the drop in the markets came when the yield on the 10-year Treasury briefly dropped below the two-year yield Wednesday. It's an ominous signal, described by market watchers as an "inverted yield curve," that has predicted past recessions.
Investors have been plowing money into long-term U.S. government bonds for months, sending yields sharply lower, as they anticipate slower economic growth.
The market tumble also followed a series of concerning economic indicators from Germany and China, signaling renewed recession fears in the global economy.
New data from China indicated Wednesday that the country's factory output of goods, retail spending and investment weakened in July.
Other bad news included word that Germany's economy shrank 0.1% in the second quarter due to a decline in exports, also signaling that a recession could be around the corner.
A growing trade fight has intensified in recent weeks after President Trump accused China of manipulating its currency. His comments came as he threatened to levy tariffs on about $300 billion of Chinese goods, extending existing tariffs.