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May 31, 2019, 8:31 p.m. EDT

Here’s the damage done to the stock market since Trump’s May 5 trade tweet

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By Mark DeCambre, MarketWatch

What’s our damage so far?

The bullish dynamic for risk assets on Wall Street is beginning to unravel, clearly. Blame it on trade-war fears, at least partly sparked by a May 5 tweet from President Donald Trump , or peg it to worries that the global economy is facing a pronounced slowdown. In any case, major assets are reflecting deepening concerns about the durability of bull run for stocks, which will mark its 10th year in about a month.

Here is how the market is setting up:

Nasdaq nears correction territory

The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -0.46% stands down 7.6% from its record on May 3. Most market participants view a decline of at least 10% from a recent high as representing a correction.

S&P 500 threatens to fall below 200 day

The S&P 500 /zigman2/quotes/210599714/realtime SPX -0.65% is trading near its 200-day moving average, at 2,776.04, in afternoon trade. The index closed at 2,783.02 on Wednesday. A breach below that point would represent a longer-term bearish momentum shift for the broad-market index. Market technicians tend to view moving averages as the demarcation between bullish and bearish momentum in an asset.

Check out : Here’s why stock-market bulls should heed the bond market’s warnings

Bonds have trounced stocks

The exchange-traded iShares 20+ Year Treasury Bond ETF /zigman2/quotes/206026314/composite TLT +1.08% has gained 4.4% since May 3, compared with a negative 5.5% return for the S&P 500 and a negative 5.2% return for the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.42% .

Deep inversion

The 10-year Treasury note yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -0.42% fell below its 3-month /zigman2/quotes/211347046/realtime BX:TMUBMUSD03M -0.0047%   deepening an inversion of the yield curve, which measures the difference between the yield on the longer-dated Treasury and its shorter-dated counterpart.

Such rate inversions are rare because investors tend to demand higher yields for extending loans over a longer period. Therefore when rates invert it is viewed as a signal that an economic recession is in the offing. The 3-month/10-year inversion currently stands at the most severe since 2007.

Other asset moves

The small-capitalization Russell 2000 index /zigman2/quotes/210598147/delayed RUT -0.72% , which should be more resilient to trade-war issues but tend to reflect growing domestic slowdown worries, has fallen 7.7% since May 3 and is off more than 14% from its August 31 peak.

The Dow Jones Transportation Average /zigman2/quotes/210598063/realtime DJT -3.59%  is down 9.4% since early May.

The Stoxx Europe 600 Index /zigman2/quotes/210599654/delayed XX:SXXP -0.37%  is down 10.5% since its April 15 peak and off 5.1% since early May. Meanwhile, yields on German 10-year bonds /zigman2/quotes/211347112/realtime BX:TMBMKDE-10Y -16.96% , a proxy for the health of the European economy, have deepened their slide, yielding negative 0.18% compared with a yield at 0.02% on May 3, before Trump’s tweet storm.

In Asia, the Shanghai Composite Index /zigman2/quotes/210598127/delayed CN:SHCOMP -0.83%   has declined by 5.3%, while China’s benchmark CSI 300 Index /zigman2/quotes/210598128/delayed XX:000300 -0.75%   has declined by 6.4% over the same period.

Read: Bond-market inversion resembles 1998 — meaning ‘peak risk-off’ for the stock market, says Fundstrat’s Lee

US : U.S.: Nasdaq
-37.59 -0.46%
Volume: 1.67M
July 17, 2019 5:16p
-19.62 -0.65%
Volume: 1.74B
July 17, 2019 5:04p
US : U.S.: Nasdaq
$ 131.99
+1.41 +1.08%
Volume: 9.66M
July 17, 2019 4:00p
US : Dow Jones Global
-115.78 -0.42%
Volume: 196.78M
July 17, 2019 5:04p
add Add to watchlist BX:TMUBMUSD10Y
BX : Tullet Prebon
-0.0087 -0.42%
Volume: 0.00
July 18, 2019 1:37a
add Add to watchlist BX:TMUBMUSD03M
BX : Tullet Prebon
-0.0001 -0.0047%
Volume: 0.00
July 18, 2019 1:37a
US : US Composite
-11.22 -0.72%
Volume: 1.11M
July 17, 2019 5:56p
US : FactSet Prices
-387.66 -3.59%
Volume: 95.16M
July 17, 2019 5:04p
-1.44 -0.37%
Volume: 0.00
July 17, 2019 5:50p
add Add to watchlist BX:TMBMKDE-10Y
BX : Tullet Prebon
-0.04 -16.96%
Volume: 0.00
July 17, 2019 6:00p
CN : China: Shanghai
-24.22 -0.83%
Volume: 9.86B
July 18, 2019 1:22p
XX : China Securities Index
-28.67 -0.75%
Volume: 5.77B
July 18, 2019 1:22p

Mark DeCambre is MarketWatch's markets editor. He is based in New York. Follow him on Twitter @mdecambre.

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