NEW YORK (AFP) – It was an ugly day for Wall Street, as stocks plummeted on Wednesday (Aug 14) amid worsening economic fears after US Treasury yields briefly inverted, flashing a warning sign for a coming recession.

But President Donald Trump once again blamed the Fed for the economic woes and the yield curve inversion, saying the US central bank is a bigger threat than China and is “clueless.”

The Dow Jones Industrial Average fell 3.1 per cent to finish at 25,479.42, a loss of about 800 points – its worst day of 2019.

The broad-based S&P 500 slumped 2.9 per cent to 2,840.60, while the tech-rich Nasdaq Composite Index dropped 3 per cent to 7,773.94.

The sell-off came shortly after the yield on the 10-year US Treasury note briefly dipped below the yield on the two-year, a dynamic that has been a reliable harbinger of past recessions.

The rout followed the latest stream of poor economic data from overseas, including the weakest Chinese factory output data in 17 years and German data showing the economy contracted in the second quarter.

The intensifying US trade war with China has been a key factor in the concerns about the slowing global economy, but shortly after the Dow hit bottom, Trump renewed his attacks on the Federal Reserve and its chairman Jerome Powell, whom Trump appointed.

“China is not our problem… Our problem is with the Fed,” Trump tweeted, blaming “clueless Jay Powell and the Federal Reserve.”

The Fed “Raised too much & too fast. Now too slow to cut… Germany, and many others, are playing the game! CRAZY INVERTED YIELD CURVE! We should easily be reaping big Rewards & Gains, but the Fed is holding us back,” he said.

A note from Oxford Economics said the research firm’s recession models as on “high alert”.

“Financial conditions have tightened sharply in August,” Oxford added in the note. “Following a huge bull-flattening trade, the Treasury market is pricing in expectations of slower growth, softer inflation, and increased Fed easing.”

The gloomy economic reports have fueled expectations that the leading central banks will undertake new stimulus measures.

The Federal Reserve cut the benchmark interest rates last month for the first time in more than a decade and is expected to make additional cuts in the months ahead.

Trump has said he wants the Fed to cut borrowing rates by a full point.

Banking shares suffered especially significant losses, with JPMorgan Chase, Citigroup and Bank of America all losing more than four percent. Bank profits typically suffer when interest rates decline.