Wall Street drops as bond market stokes recession fears

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US stocks ended mixed on Wednesday as investors remained concerned about trade tensions between the United States and China.

Wall Street stocks bounced on Tuesday, ending a multi-session losing streak as China moved to stabilise its currency amid the escalating US-China trade war. The NASDAQ has lost 44, as the S&P 500 drops 46.

Investors already were unnerved about a cooling global economy and falling USA corporate profits. Doing so this time opens the door for USA tariffs to eventually increase to more than 25 percent on Chinese goods, says DBS research.it will likely escalate tensions between the two countries.

Technology stocks led the gains in a reversal of Monday's slump, when they bore the brunt of the market sell-off that pushed USA indexes 3 percent lower. Nike shares rose by nearly 3 percent. The companies get significant revenue from China and have been highly sensitive to swings in the ongoing trade dispute.

Japanese stocks also showed a recovery.

Industrials also rose. Aircraft components maker TransDigm jumped 13.7% after raising its profit forecast and delivering solid quarterly earnings. Brent crude, used to price global oils, rose $1.53 per barrel in London to $57.76. That helped pull energy sector stocks lower.

The increased demand for bonds caused the 10-year yield to briefly fall to its lowest level since 2016 - below 1.6 per cent.

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The yield on the 10-year Treasury touched its lowest level in almost three years, falling as low as 1.60% from 1.74% late Tuesday, before climbing back to 1.73%. Animal health company Zoetis climbed 6.8% and led health care stocks higher.

Financials were the biggest loser among S&P 500 sectors, down 1.2 per cent, while the staples and materials indexes ended up more than 1 per cent each.

The Dow Jones industrial average fell more than 500 points at the open. The Nasdaq added 29 points, or 0.4%, to 7,862. China lowered the trading range for its currency for a fourth day on Thursday, Aug. 8, 2019, showing its potential for use as a trade weapon against Washington, but the exchange rate steadied following declines that alarmed financial markets.

"Overnight you had three other central banks in the Asia Pacific region lower rates unexpectedly and that spooked traders", Mike Matousek, head trader at U.S. Global Investors, told ABC News, referring to larger-than-expected rate cuts by India, Thailand and New Zealand.

The PBOC said on August 5 it would "continue to ... take necessary and targeted measures against the positive feedback behavior that may occur in the foreign exchange market".

"As we've cut the losses in half by lunch and continued to move higher, it's become a matter of buyers remaining interested in continuing to buy stocks that they feel have been oversold and a lack of sellers' supply", said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

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