Source: CNN Money -
Is that a disco ball I see?
Stocks plunged Thursday after several economic reports in the United States raised more worries about stagnant growth and higher inflation.
I wish there was a word to describe such a scenario. Oh yeah. There is! Stagflation. Remember that old chestnut from the 1970s? Gas lines and what not? Good times. Or not.
Weekly initial jobless claims rose again and were back above 400,000. There's the "stag." And the Consumer Price Index rose at a much higher than expected rate in July. That follows a similarly strong Producer Price Index number Wednesday. Ladies and gentlemen, there's your "flation."
What are investors worried more about? If you look beyond the latest carnage in stocks Thursday, investors are clearly sending a signal that they are worried both about stagnation and inflation. But the emphasis seems to be more on the "stag."
The yield on the 10-year U.S. Treasury note hit a record low Thursday morning, dipping briefly below 2% before bouncing back a bit. Low bond yields are a tell-tale sign of economic malaise. Stop me if you've heard this before, but bond prices and yields move in opposite directions.
And investors often rush to buy Treasury bonds when they are afraid of putting money in riskier assets like stocks. That's still the case even in this brave new AA+ world we live in.
A report from Morgan Stanley Thursday also helped usher in another new flight to bonds. The investment banks said the U.S. is "dangerously close" to another recession.
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