Day Traders Diary

8/14/19

The major averages suffered their worst day of the year as the benchmark 10-year Treasury yield broke below the 2-year rate, a reliable indicator of economic recessions. The last inversion of this part of the yield curve was in December 2005, two years before a recession brought on by the financial crisis hit. The Dow Jones Industrial Average dropped 800 points or 3.05% to 25,479, its biggest point decline of the year and fourth largest point drop of all time. The S&P 500 fell 85 points or 2.93% to 2,840, while Nasdaq Composite declined 3% to 7,773.

In the five recessions since 1980, the time between the first inversion and the start of the recession has averaged just over 18 months, with a range that spans ten months to two years. Bank stocks led the declines as Bank of America and Citigroup fell 4.69% and 5.28% respectively, while J.P. Morgan also dropped 4.15%. The S&P 500 Financials Sector dipped into correction territory on an intraday basis.