U.S. stocks plunged Wednesday as a known predictor of recessions Opens a New Window. gave a strong signal that an economic downturn is coming. At one point, the Dow was down as much as 700 points, before paring the decline slightly.
Investors are also concerned about weakening economic data in Europe and Asia.
The spread between the interest rate, or yield, of the U.S. 2-year and 10-year bonds turned negative for the first time since 2007. Normally, the yield on the longer-dated bond is higher than that of the shorter-dated bond. But as investor fears increase, they sell stocks and move money out of longer-dated bonds into shorter-dated bonds, which drives down the yield on such assets.