Dow Jones sheds 400 points amid risk aversion

The Dow Jones Industrial Average has fallen over 400 points and is now below 38,500.00, with the major equity index down nearly nine-tenths of a percent due to investor sentiment.

Demand for treasuries is declining as bid-to-cover ratios on key Treasury auctions decrease, putting downward pressure on equities and bolstering the US Dollar. The auction of 7-year Treasury notes showed a bid-to-cover ratio of 2.43, down from the previous 2.48. The US still has no trouble auctioning off bond issuance, but decreasing covering bids suggest there could be declining interest in US bonds.

Wednesday is the last day of calm before the economic calendar kicks into high gear on US data, with Gross Domestic Product (GDP) and Personal Consumption Expenditures (PCE) inflation due on Thursday and Friday, respectively. Annualized US Q1 GDP is expected to ease to 1.3% versus the previous 1.6% on Thursday, and US PCE Price Index inflation is forecast to hold steady at 0.3% MoM.

The Dow Jones’ performance has been sharply lower, with all but three of its component securities in the red. The index’s declines have dragged it below the 50-day Exponential Moving Average (EMA) at 38,895.97, and the DJIA is on pace to add another red day to the chart.