Market Snapshot: Dow futures down over 400 points on weak Chinese, German economic data, U.S. yield-curve inversion

U.S. stock-index futures pointed to a lower start for Wall Street Wednesday, following a series of worrying data on global economic growth, and after the yield on the 10-year U.S. Treasury note fell below that of the 2-year note, marking an inversion of the main measure of the yield curve and flashing a recession warning signal.

How are the major benchmarks faring?

Futures for the Dow Jones Industrial Average

YMU19, -1.36%

 fell 406 points, or 1.6%, to 25,904, while those for the S&P 500 

ESU19, -1.33%

 shed 43.5 points, or 1.5%, to 2,887.75. Nasdaq-100 futures

NQU19, -1.52%,

meanwhile, lost 133.75 points, or 1.7%, to 7,616.75.

Weakness in the futures markets threatens to reverse gains notched on Tuesday, after investors cheered news that the Trump administration would delay the imposition of some new tariffs on Chinese goods, from Sept. 1 to Dec. 15.

On Tuesday, the Dow Jones Industrial Average rose

DJIA, +1.44%

 372.54 points, or 1.4%, to end at 26,279.91, for the biggest one-day gain in two months. The S&P 500 index 

SPX, +1.48%

 added 42.57 points, or 1.5%, to close at 2,926.32. The Nasdaq Composite Index 

COMP, +1.95%

 rose 152.95 points, or 2%, to 8,016.36.

What’s driving the market?

The yield on the 10-year U.S. Treasury note

TMUBMUSD10Y, -5.35%

 fell below that of the 2-year U.S. Treasury note

TMUBMUSD02Y, -4.38%

 for the first time in more than a decade early Wednesday as investors digested weak economic data out of China and Germany.

Stock index-futures extended their losses after the spread between the 10-year and 2-year notes briefly turned negative shortly after 6 a.m. Eastern Time, a phenomenon referred to as a yield-curve inversion, because yields on longer-term debt are typically higher than those for short-term bonds. This follows the inversion of the spread between the 10-year note and the 3-month, which has been negative since March.

Read: The U.S. Treasury 2-10-year yield curve inverted and that means stocks are on ‘borrowed time’

An inverted yield curve is widely seen as a recession indicator, as it signals that investors believe the economy will slow significantly or contract in the near future.

The action in the bond market followed data showing that Chinese industrial production growth in the world’s second-largest economy slowed to 4.8% year-over-year, its lowest level since 2002, while retail sales growth came in at 7.6%, down from 9.8% the month prior and well below the 8.6% consensus, according to FactSet.

Data out of Germany showed its economy contracting by 0.1% in the second quarter of 2019, the first time since the third quarter of 2018, with weakness in the global manufacturing sector and uncertainty over Britain’s planned exit from the European Union pointed to as reasons for the slowdown in Europe’s largest economy.

In company news, WeWork parent We Co. publicly filed for an initial public offering of common stock, but hasn’t provided details on the number of shares it will offer or the expected pricing. The company had confidentially filed for an IPO in April, when it was valued at about $47 billion, The Wall Street Journal reported at the time.

How are other markets trading?

The yield 30-year U.S. Treasury bond

TMUBMUSD30Y, -4.93%

 was also under pressure, falling 11 basis points to 2.022%, an all-time low.

In Europe, stocks were trading sharply lower, with the Stoxx Europe 600 index

SXXP, -1.56%

 down 1.5%

In commodities markets, the price of oil

CLU19, -3.19%

 was down 2.6%, while the price of

GCQ19, +0.14%

 edged 0.1% higher. The U.S. dollar, meanwhile, fell 0.1% against a basket of its rivals.

Asian stocks closed higher overnight, with the China CSI 300

000300, +0.45%

 rising 0.5%, Japan’s Nikkei 225

NIK, +0.98%

 adding 1% and Hong Kong’s Hang Seng index

HSI, +0.08%

 edging 0.1% higher.

Which stocks are in focus?

Wayfair Inc.

W, +0.75%

 proposed a new $750 million debt offering after the close of trade Tuesday, after which the home-furnishings retailer’s stock fell. Shares are down 4.8% in off-hours trade.

Shares of Canada Goose Holdings Inc.

GOOS, +2.73%

 fell 5.1% in premarket trade, after the luxury apparel maker reported deeper losses during the fiscal first quarter, though it surpassed expectations for revenue growth.

Shares of Cisco Systems Inc.

CSCO, +2.29%

 could be in focus Wednesday, ahead of the company’s fiscal fourth-quarter earnings report, due to be released after the close.

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