Wall Street’s main indexes declined about 1 percent on Friday after a raft of weak manufacturing data from the United States and Europe led to a yield-curve inversion, stoking fears of an economic slowdown.
The spread between three-month Treasury bills and 10-year note yields inverted for the first time since 2007. An inverted yield curve is widely understood to be a leading indicator of recession.
U.S. manufacturing activity recorded its slowest pace of growth since June 2017, data from IHS Markit showed.
Germany manufacturing also contracted further in March, showing its lowest reading since June 2013, while factory activity across the euro zone looked equally dismal.
“Right now there are clearly enough signs to be cautious about a number of factors that can potentially cause an economic recession,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.
“It doesn’t guarantee it,” Frederick said, “but if multiple other pieces of data show the same thing then it just increases the chances.”
Financial stocks took the biggest hit, tumbling 2.16 percent, the most among the 11 main S&P sectors. The banking sector plunged 2.96 percent.
The Federal Reserve this week abandoned projections for any interest rate hikes this year, as policymakers see a U.S. economy that is rapidly losing momentum.
Adding to the uncertainty were concerns over trade, as U.S. trade delegates head to Beijing next week. President Donald Trump said a final agreement with China “will probably happen.”
Chipmakers, which get a huge chunk of their revenue from China, fell. The Philadelphia chip index was down 1.56 percent, while the broader technology sector declined 0.88 percent.
At 10:57 a.m. ET the Dow Jones Industrial Average was down 245.81 points, or 0.95 percent, at 25,716.70. The S&P 500 was down 26.98 points, or 0.95 percent, at 2,827.90 and the Nasdaq Composite was down 87.32 points, or 1.11 percent, at 7,751.64.
Only the defensive utilities, real estate and consumer staples sectors were trading higher.
Nike Inc dropped 4.9 percent after the sportswear maker’s quarterly revenue failed to beat Wall Street estimates. Its partner Foot Locker Inc fell 4.4 percent
Declining issues outnumbered advancers for a 2.82-to-1 ratio on the NYSE and for a 3.90-to-1 ratio on the Nasdaq.
The S&P index recorded 49 new 52-week highs and two new lows, while the Nasdaq recorded 21 new highs and 44 new lows.
Canada’s main stock index pulled back from six-month highs on Friday after the country’s overall inflation missed the central bank’s target for the second straight month, while energy stocks came under pressure from a drop in oil prices.
Near midday, the S&P/TSX Composite Index was down 164 points, or 1 per cent, at 16,080, on pace for its steepest drop in two months.
Domestic economic data showed Canada’s annual inflation rate edged up to 1.5 percent in February, but remained below the Bank of Canada’s 2.0 percent target for the second successive month.
Meanwhile, Canadian retail sales unexpectedly dropped for the third consecutive month in January, mainly due to weak auto sales.
The heavyweight financials sector slipped 0.6 percent, while the industrials sector fell 0.6 percent.
The largest percentage gainers on the TSX were BRP Inc , which jumped 5.7 percent after posting fourth-quarter results, and Fortuna Silver Mines Inc, which rose 1.8 percent.
MEG Energy Corp fell 3.1 percent, the most on the TSX. The second biggest decliner was Baytex Energy Co, down 2.8 percent.