US open: Stocks head south as Treasury yield curve slides to 12-year low
US stocks opened decidedly lower on Wednesday erasing gains from the previous session as Treasuries posted a sharp rally while US-China trade tensions remained firmly in focus.
As of 1530 BST, the Dow Jones Industrial Average was down 1.16% at 25,728.46, while the S&P 500 was 0.74% weaker to 2,860.44 and the Nasdaq Composite opened 0.31% softer at 7,809.12.
The Dow opened 301.06 points weaker after closing the previous session 311.78 points higher. Major indices turned in their worst performance so far this year on Monday.
News that China was taking steps to steady its currency, which breached the 7.0 yuan level versus the US dollar for the first time in 11 years on Monday, seemingly calmed investor concerns about a global currency war earlier in the session.
However, market participants moved back into safe havens such as gold, much like they had on Monday when the yellow metal reached a more than six-year high.
Elsewhere, the 10-year Treasury yield slid below 1.6% after staring August above 2%, its lowest level since 2016. The move further narrowed the yield curve between the 10-year rate and the 2-year yield, a widely watched recession indicator, as the spread fell to its lowest level since 2007 at less than 8 basis points.
In corporate news, shares of financial heavyweights JP Morgan Chase and Bank of America led declines, falling by 2.8% and 3.3%, respectively.
Elsewhere, Disney shares slid after posting weaker-than-expected quarterly results overnight.
Earnings from Booking Holdings, Fox Corp and AIG meanwhile were scheduled for later in the day.
On the data front, total mortgage applications shot up 5.3% in the week ended 2 August as homeowners scrambled to take advantage of a marked reduction in mortgage interest rates.
According to the Mortgage Bankers Association, application volumes were 46.5% higher year-on-year last week, with refinancing driving the volume with a 12% week-on-week increase and 116% year-on-year growth.
However, new mortgage applications fell 2% for a fourth straight weekly decrease but purchase volume still came in 7% firmer year-on-year.
Consumer credit figures for the month of June were set to be released at 2000 BST.