Dow slumps triple digits as Treasury yield curve inverts (recession indicator)

MarketWatch.com (by Dow Jones) ^ | 12/27/05 | Tomi Kilgore

[SierraWasp]

Dow slumps triple digits as Treasury yield curve inverts ($INDU, $COMPQ, $SPX, $TNX) by Tomi Kilgore

NEW YORK (MarketWatch) -- U.S. stocks closed sharply and broadly lower, with the Dow industrials suffering its first triple-digit loss in 2 months, as the Treasury yield curve inverted for the first time in five years, sparking fears of a possible recession. The Dow ($INDU) slumped 105 points to an unofficial close of 10,778, its lowest close in 2 weeks and the biggest one-day point loss since Oct. 27. The Nasdaq Composite ($COMPQ) shed 22 points to 2,227 and the S&P 500 ($SPX) slid 12 points to 1,257. The 2-year Treasury note yielded 4.347% while the 10-year Treasury yield ($TNX) fell 0.039 percentage points to yield 4.341%; the only time in the last 30 years that an inverted yield curve wasn't followed by a recession was in 1998, when the curve inverted briefly during the Asian financial crisis. Recession worries overshadowed a sharp drop in natural gas prices amid reports of warmer-than-usual weather, with the front-month futures contract tumbling 10% to a 4-month low of $11.022 per million British thermal units on the New York Mercantile Exchange.

[NeoCaveman]

When you guys are saying 'this market sucks', 'I think I will short some stock', 'I am going to get some more Puts'...I know it will be time to reverse...

This bull could be wrong, but I'm loving the dropping energy prices. Yes, the bond market is a bit disconcerting...

[Brilliant]

It might indicate that investors expect a recession, because interest rates typically go down in a recession. But all it really indicates is that investors think interest rates will be lower in the future. It does not suggest WHY they think that. And there are lots of reasons why interest rates can go down besides a recession.

[NeoCaveman]

The bubble just popped in Boston.

I'd dump the homebuilders, the REIT's, and energy. Tech looks good to me for the first time in 5 years, and then there is also always health care. It's probably time, or past time, for sector rotation.

[SierraWasp]

"I assert that there was an inverted yield curve in December 1988, and no recession."

Then, if your assertion is correct, what in the heck is wrong with these (bleepin) financial newswriters that they missed a biggie like that??? Splain that to me, will ya?

Also, I didn't see any reference to the 2% rule someone posted upstream on this thread.

[Moonman62]

Thank the Fed. If they hadn't overreached in their raising of short term rates, there wouldn't be a yield curve inversion.

You're right. Greenspan thinks he knows better than the markets. But most people have been brainwashed to think that the private sector causes recessions. You know, when it produces too much, hires too many people, and gives too many raises. All horrible things according to Greenspan. And it is called a business cycle, not a Federal Reserve cycle.

[RegulatorCountry]

"Over 800,000 real estate related jobs are at risk; if they are lost when the real estate bubble collapses, watch out."

Well, there's always section eight housing.

[Jigsaw John]

The Dow ($INDU) slumped 105 points to an unofficial close of 10,778, its lowest close in 2 weeks and the biggest one-day point loss since Oct. 27.

WOW! And right after Christmas??

[Moonman62]

You got it! They did the same thing in 2000 and brought on the Clinton Recession that President Bush inherited and was blamed for -- after-wards Greenspan admitted they were too aggressive and what does he do? He does it all over again.

GWB made Greenspan's blunder far worse. The first thing he should have done was hold Greenspan accountable and asked for his resignation. Greenspan even offered it in his own obtuse way.

[Jigsaw John]

I think it's more of an indicator that the increases in interest rates are going to stop.

They'd better. Or they can kiss any recovery good bye.

[antaresequity]

Great Historical Yield Curve Java Animator Here....Watch the Yield Curve From 1998 to Present wile on accompanying chart the position on the Dow is tracked...

http://stockcharts.com/charts/YieldCurve.html

[Jigsaw John]

Watch the news very closely. Over 800,000 real estate related jobs are at risk

Most of the people that got their RE license in the past two years never had any homes to sell.

I know two that got their licenses in CA in the past two years, and went back to their old jobs due to the fact that there are not that many homes for sale, and they never were able to get any sales contracts of their own.

[nickcarraway]

Take into account the time of year and thin trading.

[VegasCowboy]

Plus, all of the Asian money in our Treasury market is keeping the long end of the curve down. Until there is demand from investors to increase those rates, we won't see them rise. This is good news for our mortgage market.

I just hope the Fed stops raising short-term rates soon, and it looks like they will.

[BnBlFlag]

Greenspan pulling his usual stunt to create a recession just before an election when Pubbies are the incumbents.

[Recovering_Democrat]

For the record, I was joking when I said 'Time to panic'.

[SierraWasp]

Good graph of Yield curve here! Sure would appreciate you or anyone else that knows how to bring it over here.

[Arizona Carolyn]

I love our President, but his one great strength is also one of his failings -- he seem incapable of firing people or asking/accepting resignations... I would be quite happy if he overcame this early in his administration and had fired Greenspan (whom I loathe).

[SierraWasp]

Could you please be just a wee bit more adamant?

[xcamel]

Not gonna happen sour pickle.

[NeoCaveman]

For the record, I was joking when I said 'Time to panic'.

Now if you had said "We're doomed" then there would be no doubt, lol.