dow jones industrial average, stock market
The Dow stumbled on Wednesday as the trade war neared a crucial deadline. One strategist warns investors to prepare for a stock market “death spiral.” | Source: REUTERS / Brendan McDermid

The Dow stumbled toward a losing session on Wednesday after President Trump appeared to double down on his controversial trade war strategy ahead of new tariffs scheduled for this weekend.

Meanwhile, one Wall Street strategist warns that the stock market could be on the cusp of entering a nauseating “death spiral.”

Dow Eyes Second Straight Loss

The Dow Jones Industrial Average and other bellwether indices continued to bleed this morning after Tuesday’s early rally fell short.

As of 9:33 am ET, the Dow had lost 96.46 points or 0.37% to decline to 25,681.44.

dow jones industrial average chart
The Dow declined for a second straight session on Wednesday. | Source: Yahoo Finance

The S&P 500 slid 10.41 points or 0.36%, dropping the large-cap index to 2,858.

The tech-heavy Nasdaq declined 48.88 points or 0.62% to 7,778.06.

Trump Defends China Strategy as Tariff Deadline Looms

Stocks fell as the trade war crept toward another crucial deadline without a market-friendly resolution.

Both the White House and Beijing plan to impose new tariffs on one another in just four days.

President Trump had appeared to soften his hardline stance on China earlier in the week, stoking optimism that he might delay those tariffs further to bolster a panicky stock market.

However, Trump defended his trade war strategy in a Wednesday morning tweet, lashing out at the “free and interesting advice” he had received from “people who have tried to handle it before and failed miserably.”

“We are doing very well with China,” Trump protested. “This has never happened to them before!”

‘Death Spiral’ Awaits Stock Market Once Recession Strikes

Meanwhile, the US economy’s recession alarms continue to blare.

This morning, the main yield curve – which measures the spread between the yield on the 10-year and 2-year Treasury bonds – plunged to negative 6 basis points, its worst mark since the financial crisis.

US Treasury bond yield curve
The gap between the yield on the 2-year Treasury bond (blue) and 10-year note (orange) widened on Wednesday morning. | Source: TradingView

The 30-year Treasury note also slid to 1.906%, a new record low.

Add in troubling housing and manufacturing data, and it’s easy to see why perma-bears like Gluskin Sheff chief economist David Rosenberg have already begun to gloat.

NorthmanTrader strategist Sven Henrich warns that if a recession does set in, the stock market risks succumbing to a vicious death spiral.

dow jones industrial average long-term chart
If a death spiral strikes the stock market, it could force the Dow below the 20,000 level. | Source: Yahoo Finance

How vicious? Henrich believes the S&P 500 could careen as low as 2,100 – more than 25% below Tuesday’s close at 2,869.16.

If “central banks lose control and we actually do go into a global recession… it can head all the way down to 2,100 on the S&P,” Henrich told CNBC

A comparable pullback would batter the Dow below the 20,000 level – a mark it hasn’t traded below since early 2017.

Click here for a real-time Dow Jones Industrial Average chart.

You May Also Like

Growth Recession Chokes India as GDP Tumbles, and No One Seems to Care

India’s GDP growth fell to a six-year low in Q2, but the country’s government is in denial while the economy reels under a recession.

Gold Traders Target Yearly-Highs as Trump Tariffs Risk Stock Market Selloff

Gold price avoided a steep drop. In the short-term, warnings of a further stock market sell-off by strategists position it for a relief rally.

Dow Anticipates Make-or-Break Moment on a Jam-Packed Wednesday

Ahead of a full day of market-moving events, the Dow made its way meaningfully higher on Wednesday on positive trade news.