U.S. stock futures were pointing to a lower open Wednesday a day after the Dow Jones Industrial Average gave up nearly half of Monday's 270-point bounce. The 623-point Dow plunge Friday, put August deeper into the red, risking the second monthly drop in an otherwise strong 2019. The culprit for the recent decline in stocks has been falling bond yields. Investors have been piling into the perceived safety of fixed-income on concerns about a global economic slowdown and the U.S.-China trade war.
With bond prices soaring in their reverse relationship with yields, the inversion of the 10-year Treasury yield deepened as it fell further below that of the 2-year on Wednesday morning. That inversion, the worst since 2007, has briefly happened a number of times in recent weeks. But this time it persisted since flip-flopping again Tuesday. Such a move has preceded every recession in the U.S. over the past 50 years, though the economic downturn on average tends to lag by up to two years.
The 30-year Treasury yield went below 2% again, hitting a new record low Wednesday morning after dropping below the S&P 500′s stock dividend yield on Tuesday for the first time since 2009. Bespoke Investment Group examined data going back four decades. Other than the financial crisis, the only other time when a similar stock-bond inversion came close to happening was in July 2016, right after the Brexit vote.
The British pound dropped against the U.S. dollar Wednesday morning after U.K. Prime Minister Boris Johnson said he would schedule the formal reopening of parliament for Oct. 14 — a highly controversial move that would restrict lawmakers' time to act before the Brexit deadline two weeks later, and increase the chances of the U.K. leaving the European trading bloc with no deal. Johnson is seeking to strike a renewed departure agreement with the EU.
Purdue Pharma and its owners, the Sackler family, are offering to settle more than 2,000 lawsuits against the company for $10 billion to $12 billion. The potential deal was part of confidential conversations and discussed by Purdue's lawyers at a meeting in Cleveland last week on Aug. 20, two people familiar with the mediation told NBC News. Privately held Purdue Pharma makes the opioid painkiller OxyContin. On Monday, an Oklahoma judge ruled against Johnson & Johnson in the state's opioid lawsuit, ordering the company pay a $572 million fine. J&J plans to appeal.