Stocks finished mixed Wednesday in a wild trading day, paring sharp losses sparked by fears over the U.S.-China trade war.
The Dow Jones Industrial Average, which was pulled down by Walt Disney's (DIS - Get Report) disappointing earnings, hit a session low nearly 600 points down, before finishing down 22 points, or 0.09%, to 26,006. The S&P 500 rose 0.08%, while the Nasdaq was up 0.38%.
Disney, JP Morgan Chase (JPM - Get Report) and IBM (IBM - Get Report) were the Dow's three biggest losers.
Earlier this week, the U.S. Treasury Department labeled China a currency manipulator -- the first such distinction since 1994. In response, officials in Beijing pegged the yuan at $6.9996 against the dollar Wednesday, the lowest midpoint setting in more than 11 years, and allowed the currency to drift below the 7 mark for the third consecutive session.
The move both indicates China's need to weaken its currency to mitigate the affects of tariffs put in place by the Trump administration as well as Beijing's insistence that it must be treated as an equal in trade talks with the U.S., the world's biggest economy.
As Trump Alleges Manipulation, China Speaks in Proverbs About Its Exchange RateInvestors responded to the economic firefight by turning to the bond market. U.S. Treasury bond yields dropped to multiyear lows Wednesday as investors worried that the trade dispute between the world's two largest economies could trigger a global recession. The spread between 3-month Treasury bills and 10-year note yields was inverted by 37 basis points, the most since March 2007.
Benchmark 10-year Treasury note yields fell at one point to a low of 1.595%, the lowest since autumn 2016. They were down 0.027 to 1.712%.
"Investors' entire investment worldview has been whipsawed by trade," said Alec Young, managing director of global markets research at FTSE Russell.
"The consensus expectation that U.S.-China trade relations would improve has turned out wrong as tensions escalate. The fact that this is happening in the context of an already weak global growth environment is pushing bond yields to unprecedented lows globally as recession fears mount."
Even though the U.S. consumer and economy remain in relatively good shape, Young said, "trade worries and negative bond yields overseas are pulling treasury yields down dramatically."
"The pace of the decline has been breathtaking as it's accelerated over the past two weeks," he said. "All this macroeconomic uncertainty makes it impossible to be optimistic about corporate earnings reaccelerating in the second half and into 2020. As such, already full valuations have started to decline as markets discount weak earnings visibility."
President Donald Trump took to Twitter declare that "our problem is not China - we are stronger than ever, money is pouring into the U.S. while China is losing companies by the thousands to other countries, and their currency is under siege. Our problem is a Federal Reserve that is too proud to admit their mistake of acting too fast and tightening too much (and that I was right!)"
"They must Cut Rates bigger and faster," Trump wrote, "and stop their ridiculous quantitative tightening NOW."
"Three more Central Banks cut rates." Our problem is not China - We are stronger than ever, money is pouring into the U.S. while China is losing companies by the thousands to other countries, and their currency is under siege - Our problem is a Federal Reserve that is too.....
- Donald J. Trump (@realDonaldTrump) August 7, 2019Data from Germany early Wednesday, which showed the steepest year-on-year decline in industrial production from Europe's biggest economy since 2009, offered further evidence that the ongoing U.S.-China trade spat was taking its toll around the world
WATCH: Jim Cramer Reveals His Best Investing Advice for a Volatile MarketIn company news, Walt Disney shares fell 4.9% to $134.89. The media powerhouse posted weaker-than-expected third-quarter earnings as last year's takeover of 21st Century Fox and its move to challenge Netflix (NFLX - Get Report) in online streaming entertainment ate into its bottom line. Walt Disney is Real Money's Stock of the Day.
When to Buy the Dip in Disney Stock Shares of CVS Health ( CVS - Get Report) climbed 7.5% to $58.13 after the healthcare company posted stronger-than-expected second quarter earnings Wednesday, and boosted its full-year profit guidance. Behind the Counter: A History of CVS Teva Pharmaceutical Industries ( TEVA - Get Report) shares rose 3.2% to $7.28 after the drug company posted stronger-than-expected second-quarter earnings and reiterated its full-year profit guidance. New generic-drug launches in North America boosted revenue growth. Global oil prices also entered bear market territory. Brent crude contracts for October delivery were $1.70 lower from their Tuesday close in European trading and changed hands at $57.24 per barrel while West Texas Intermediate contracts for September, which are more tightly linked to U.S. gas prices, were marked $1.44 lower at $52.19 per barrel. Disney, CVS, and JPMorgan Chase are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.