Stocks log worst day in over 2 ½ months as bond market flashes recession warning

U.S. stocks closed sharply lower Friday, with all major indexes logging their worst day in more than 2 ½ months, after a downbeat round of economic data in Europe and the U.S. stoked global growth fears while a closely watched measure of the yield curve inverted for the first time since 2007, triggering recession worries.

Those fears were compounded when data showed growth in the U.S. manufacturing sector slowed to a 21-month low in March, according to the flash reading of IHS Markit’s purchasing manager’s index. The manufacturing index fell to 52.5 from 53 in February and below the 53.5 expected by economists in a FactSet survey.

As equities came under pressure, investors bought bonds, forcing the spread between the 3-month Treasury bill and the 10-year note to invert for the first time since 2007. A so-called yield curve inversion, where the rate of longer-dated debt falls beneath its shorter-dated counterparts, is widely viewed as a fairly accurate recession indicator, and the spread between three-month and 10-year yields is the most closely followed by economists.U.S.

After weak economic data helped send German government bond yields negative Friday, “it tends to make it difficult for our Treasurys to stay higher, and it feed the narrative that we have slowing global growth,” he added. “The Fed has set the tone for the markets, and if you trust their ability to ‘see around corners,’ then you will continue to maintain a risk-off position,” said Giddis in a note to clients.

Shares of Hibbett Sports Inc. HIBB, +20.29% rallied 20% after the sporting-goods store operator reported same-store sales growth of 3.8% versus the flat growth expected by analysts. The firm also issued guidance for the full 2020 fiscal year that surpassed forecasts.

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