Dow drops 800 points after ominous warning from bond market

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The Dow Jones Industrial Average sank 800 points after the bond market flashed a warning sign about a possible recession for the first time since 2007. (AP Photo/Richard Drew)

The Dow Jones Industrial Average sank 800 points after the bond market flashed a warning sign about a possible recession for the first time since 2007.

The yield on the 10-year Treasury briefly dropped below the two-year yield Wednesday, an ominous signal that has predicted past recessions.

Investors have been plowing money into long-term U.S. government bonds for months, sending yields sharply lower, as they anticipate slower economic growth.

Retailers came under especially heavy selling pressure after Macy’s issued a dismal earnings report. Macy’s plunged 13% after slashing its full-year profit forecast.

The Dow Jones Industrial Average fell 800 points, or 3%, to 25,479.

The S&P 500 lost 85 points, or 2.9%, to 2,840. The Nasdaq lost 242 points, or 3%, 7,773.

Bond prices soared. The yield on the 10-year Treasury sank to 1.58% from 1.68% Tuesday, a big move.

Stocks opened sharply lower on Wall Street following big losses in Europe after German’s economy shrank in the second quarter and as the U.S. bond market flashed a warning about a possible recession.

The Dow fell 388 points, or 1.5%, to 25,894.

The S&P 500 lost 39 points, or 1.3%, to 2,887. The Nasdaq lost 1.5% to 7,894.

The yield on 10-year Treasury briefly fell below the yield on the 2-year note, which has correctly predicted previous U.S. recessions.

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