The Dow Is Rising Even After Bonds Sent Another Recession Signal

After a string of wild swings, the Dow Jones Industrial Average looks set for a gain at the open on Tuesday, even as a portion of the yield curve inverts again.

Dow futures have risen 81 points, or 0.3%, while S&P 500 futures have advanced 0.3%, and Nasdaq Composite futures have gained 0.5%.

Stocks have been whipsawed by the ratcheting up of tensions between the U.S. and China, with the Dow experiencing a big drop on Friday, before recovering half its loss on Monday. Those swings were caused first by China announcing new tariffs on U.S. goods, President’s Donald Trump’s retaliation, and then positive chatter on Monday. Now stocks are trying to build on those gains as investors wait for signs that talks between the U.S. and China will actually happen—and that they will be productive. “Risk appetite is stable on Trump’s assuaging comments on China,” writes Oanda’s Edward Moya. “With no major breakthroughs expected on the trade front today, we could see that momentum fade.”

Bonds, however, are not taking the situation lightly, and why should they? Economic data globally continues to be weak—Germany’s economy second reading of second-quarter GDP showed its economy contracted by 0.1%–and the risks are high. The U.S. 10-year yield has slipped 0.027 percentage point to 1.508%, while the 2-year yield has dipped just 0.0085 percentage point to 1.5305%. Yes, the fact that the 10-year yield is lower than the 2-year means that that portion of the yield curve is inverted once again, a sign that a recession could be looming.” Bonds seem to continue to pound the table that the world is going to get worse before it gets better,” writes NatAlliance Securities Andrew Brenner.

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Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya