Stocks slide as rate cuts stoke fear of an economic slowdown

Stocks fell in afternoon trading on Wall Street Wednesday as fears that an escalating trade war between the U.S. and China may stifle global economic growth. Investors sought shelter in bonds, gold and other safe-haven holdings.

Bond yields sank around the world, something that happens when investors see a weaker economy and low inflation on the way. Gold prices jumped to the highest price in more than six years.

Financial sector stocks led the way lower, even after a furious morning sell-off that knocked the Dow Jones Industrial Average down more than 580 points eased by midafternoon.

The market has been roiled the past couple of weeks by growing anxiety as the U.S. and China clash over trade.

Last week, President Donald Trump rattled markets when he promised to impose 10 percent tariffs next month on all Chinese imports that haven’t already been hit with tariffs of 25 percent. China struck back on Monday, allowing its currency, the yuan, to weaken against the U.S. dollar.

China stabilized the yuan on Tuesday and that helped lift U.S. stocks a day after they endured their worst day of the year. But the markets turned volatile again after central banks in New Zealand, India and Thailand cut key interest rates Wednesday.

The surprise interest-rate cuts triggered a slide in bond yields around the world as investors scrambled for safety.

The yield on the 10year Treasury dropped to its lowest level in nearly three years, down to 1.67 percent from 1.74 percent late Tuesday, and it’s been sliced nearly in half in just nine months.

“The Treasury market is trading much higher ... as investors continue to seek a safer haven, completely unsure as to what may happen next,” Kevin Giddis, head of fixed income capital markets at Raymond James wrote in a report.

The S&P 500 index was down 0.2 percent as of 2:13 p.m. Eastern time. The Dow slid 85 points, or 0.3 percent, to 25,946. It was down as much as 589 earlier. The Nasdaq shook off an early slide, edging up 0.2 percent.

The volatile trading has put a dent in the major indexes yearly gains. The S&P 500 is down 3.5 percent for August.

The market’s turbulent turn comes less than two weeks after the benchmark S&P 500 hit an alltime high.