The Beginner’s Guide to Stocks

All You Need to Know on Why the Dow Jones Industrial Average is Down Today

A lot of investors whether new or old probably know that Dow Jones Industrial Average is merely a stock market index. Still named Dow, this Dow Jones Industrial Average is established on thirty large public trading companies on any given trading day. The term Dow stock is often utilized by the investors and the media to imply health summary of the whole stock market. This article is about the reason for the fall of Dow Jones Industrial Average.

On 4th December 2018, the Dow Jones Industrial Average dropped down with over seven hundred points as a competitive market sell-off ruined any hope for a rebound. The day before had seen a moderate stock bounce back, and the investors were wondering on why the Dow Jones Industrial Average fell the day after. Earlier than this situation materialized, the White House had communicated of a non-permanent truce between China and the US (United States) who are famous trade enemies. However, since the truce was communicated, the American government has moved on quickly offering definite details displaying how China conceded at the G-20 summit.

The US decided to hesitate on the warning they had issued to China regarding raising the tariffs on their products. However, from the official statements of two trade delegations, it appears not much was agreed on the negotiations. What followed was confusion with the Trump administration and the White House economic advisor issuing out contrasting statements on when the hold on tariffs would begin. The disparities left investors to wonder if substantial success between the two nations can be arrived at in the foreseeable future. The investors have lost faith, and the marketers are getting worried regarding a recession that is hinting to be around the corner.

During the same period the yields of ten-year Treasury bonds went down to the decreased by the largest amount seen in a decade. Although the yields for the ten-year bonds have been fluctuating over time, the investors are bothered this time since it has caused flattening of the bond yield curve. This means that the yields of two-year bonds and the ten-year bonds will fall. In addition, it highlights that both inflation and rates of betting interests will drop for the following ten years. These are the signals for a recession since they are regarded as the default financial atmosphere for such a situation.

Last but not least, the stock markets do not generally move into a phase of aggressive sale-off unless the yield curve overturns. This hints that the yields of ten-year Treasury bond fall under those of two-year bond.

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