Stocks sink as bonds send up recession warning flag

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NEW YORK (AP) — Stocks are falling sharply after the bond market threw up another warning flag on the economy.

The yield on the 10-year Treasury briefly dropped below the two-year Treasury's yield Wednesday morning for the first time since 2007. That's an ominous signal that has correctly predicted many past recessions.

Investors dumped stocks, more than erasing gains from a rally the day before.

Retailers came under especially heavy selling pressure after Macy's issued a dismal earnings report.

The Dow Jones Industrial Average fell 661 points, or 2.46%, to 25,618.

The S&P 500 lost 70 points, or 2.42%, to 2,856. The Nasdaq lost 218 points, or 2.7%, 7,800.

U.S. government bond prices continued to soar as investors sought safety. The yield on the 10-year Treasury note sank to 1.59% from 1.68% Tuesday.

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9:43 a.m.

Stocks are opening sharply lower on Wall Street following big losses in Europe after German's economy shrank in the second quarter and as the U.S. bond market flashed a warning about a possible recession.

The Dow Jones Industrial Average was down as much as 400 points early Wednesday.

U.S. government bond prices continued to soar as investors sought safety, briefly pushing a key yield below a threshold that has correctly predicted recessions in the past.

The Dow fell 388 points, or 1.5%, to 25,894.

The S&P 500 lost 39 points, or 1.3%, to 2,887. The Nasdaq lost 1.5% to 7,894.

The yield on 10-year Treasury briefly fell below the yield on the 2-year note, which has correctly predicted previous U.S. recessions.

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