U.S. stocks, bond yield slump, signaling market jitters

U.S. stocks fell broadly Tuesday as anxious investors shifted money into bonds, sending yields to their lowest level in nearly two years.

Rising bond prices, which pull yields lower, are typically a sign that traders feel jittery about long-term growth prospects and would rather put their money into safer holdings.

The yield on the benchmark 10 year Treasury fell to 2.26 percent Tuesday, the lowest level since September 2017. That put it below the 2.35 percent yield on the threemonth Treasury bill.

When that kind of “inversion” in bond yields occurs, economists fear it may signal a recession within the coming year.

It has happened multiple times so far this year.

Investors have been weighing a mix of encouraging and discouraging economic reports this year as they also keep an eye on unpredictable swings in the escalating trade war between the U.S. and China.

“If the bond market was saying that the economy is on OK footing then you wouldn’t see yields fall like they are,” said Willie Delwiche, investment strategist at Baird. “In many respects, equities are waking up to what’s happening in bonds.”

The S&P 500 index fell 23.67 points, or 0.8 percent, to 2,802.39. The index had been up 0.5 percent earlier in the day.

The Dow Jones Industrial Average dropped 237.92 points, or 0.9 percent, to 25,347.77, after rising about 131 points earlier. The Nasdaq composite dropped 29.66 points, or 0.4 percent, to 7,607.35. The Russell 2000 index of smaller companies gave up 10.09 points, or 0.7 percent, to 1,504.02.

Major stock indexes in Europe also declined.

U.S. stocks headed higher in the early going Tuesday as the market reopened after Monday’s Memorial Day holiday closure. But indexes reversed course by midday and never recovered.