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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 +1.42% 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 +1.20% 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 -1.12% 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 +1.06% .

Deep inversion

The 10-year Treasury note yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +1.92% fell below its 3-month /zigman2/quotes/211347046/realtime BX:TMUBMUSD03M -0.46%   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 +1.43% , 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 +1.48%  is down 9.4% since early May.

The Stoxx Europe 600 Index /zigman2/quotes/210599654/delayed XX:SXXP +1.11%  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 +8.59% , 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 -0.56%   has declined by 5.3%, while China’s benchmark CSI 300 Index /zigman2/quotes/210598128/delayed XX:000300 -0.43%   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

/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
8,162.76
+114.11 +1.42%
Volume: 1.00M
Oct. 15, 2019 2:00p
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/zigman2/quotes/210599714/realtime
US : S&P US
3,001.62
+35.47 +1.20%
Volume: 972.13M
Oct. 15, 2019 2:00p
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/zigman2/quotes/206026314/composite
US : U.S.: Nasdaq
$ 139.87
-1.59 -1.12%
Volume: 6.85M
Oct. 15, 2019 2:00p
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/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,071.24
+283.88 +1.06%
Volume: 148.79M
Oct. 15, 2019 2:00p
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/zigman2/quotes/211347051/realtime
add Add to watchlist BX:TMUBMUSD10Y
BX : Tullet Prebon
1.77
+0.03 +1.92%
Volume: 0.00
Oct. 15, 2019 2:00p
loading...
/zigman2/quotes/211347046/realtime
add Add to watchlist BX:TMUBMUSD03M
BX : Tullet Prebon
1.67
-0.0078 -0.46%
Volume: 0.00
Oct. 15, 2019 1:50p
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/zigman2/quotes/210598147/delayed
US : US Composite
1,527.01
+21.58 +1.43%
Volume: 609,480
Oct. 15, 2019 1:45p
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/zigman2/quotes/210598063/realtime
US : FactSet Prices
10,408.27
+152.17 +1.48%
Volume: 26.24M
Oct. 15, 2019 2:00p
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/zigman2/quotes/210599654/delayed
XX : STOXX
394.02
+4.33 +1.11%
Volume: 0.00
Oct. 15, 2019 5:50p
loading...
/zigman2/quotes/211347112/realtime
add Add to watchlist BX:TMBMKDE-10Y
BX : Tullet Prebon
-0.41
+0.04 +8.59%
Volume: 0.00
Oct. 15, 2019 6:01p
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/zigman2/quotes/210598127/delayed
CN : China: Shanghai
2,991.05
-16.84 -0.56%
Volume: 15.54B
Oct. 15, 2019 3:01p
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/zigman2/quotes/210598128/delayed
XX : China Securities Index
3,936.25
-16.99 -0.43%
Volume: 8.53B
Oct. 15, 2019 3:01p
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Mark DeCambre is MarketWatch's markets editor. He is based in New York. Follow him on Twitter @mdecambre.

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