NEW YORK — Compared to the free-swinging and sometimes emotional stock market, the bond market is supposed to be the sober and measured one.
It's getting more alarmed.
Bonds sounded their loudest warning bell yet of recession on Wednesday, when the yield on the 10-year Treasury briefly fell below the two-year yield. Such a thing is rare: Investors usually demand more in interest for tying up their money in longer-term debt. When yields get "inverted," market watchers say a recession may be a year or two away.
An inverted yield curve has historically been a reliable, though not perfect, predictor of recession. Each of the last five recessions was preceded by the two- and 10-year Treasury yields inverting, according to Raymond James, taking an average of about 22 months for recession to hit. The last inversion of this part of the yield curve began in December 2005, two years before the Great Recession tore through the global economy.
If all the talk about yield curves sounds familiar, it should. Other parts of the curve have already inverted, beginning late last year. But each time, some market watchers cautioned not to make too much of it.
Some market watchers also say the yield curve may be less reliable an indicator this time because of technical factors that are distorting yields. Bonds in Europe and elsewhere have even lower yields than U.S. bonds and are negative in many cases. That's sending buyers from abroad into the U.S. bond market, putting extra pressure downward on U.S. yields.
Broader measures of the U.S. economy, meanwhile, are not pointing to an imminent downturn. The job market, consumer spending and consumer confidence all remain solid to strong.
"The only thing that's flashing red or yellow right now is the yield curve," said Jay Bryson, global economist at Wells Fargo.
Eric Winograd, senior economist at AllianceBernstein, said he expects growth to slow to an annual rate of about 1.5% in the second half of this year, down from a 2.5% pace in the first six months, but to avoid a recession.
The price of benchmark U.S. crude slid $1.87, or 3.3%, to settle at $55.23 per barrel. Brent crude, the international standard, dropped $1.82 to close at $59.48.
Wholesale gasoline fell 6 cents to $1.68 per gallon. Heating oil declined 4 cents to $1.84 per gallon. Natural gas fell 1 cent to $2.14 per 1,000 cubic feet.
Gold gained $13.70 to $1,515.90 per ounce, close to a six-year high. Investors also bid up shares in mining company Newmont Goldcorp 0.8%.
Silver rose 29 cents to $17.25 per ounce and copper fell 3 cents to $2.59 per pound.
The dollar fell to 105.88 Japanese yen from 106.68 yen on Tuesday. The euro weakened to $1.1137 from $1.1174.
Overseas, Germany's DAX dropped 2.3% following the weak German economic data. France's CAC 40 fell 2.2%, and the FTSE 100 in London lost 1.7%.