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* Major indexes down over 6% in May
* U.S. Treasury yield curve inversion deepens
* Financials slip; U.S. automakers drop
* Ten of the 11 major S&P sectors trading lower
* Indexes slip: Dow 1.06%, S&P 1.04%, Nasdaq 1.17%
(Updates to early afternoon)
By Shreyashi Sanyal
May 31 (Reuters) - U.S. stocks fell on Friday after
President Donald Trump's shock threat of tariffs on Mexico
fueled fears that escalating trade wars could push the world's
largest economy into recession.
Washington will impose a 5% tariff from June 10, which would
then rise steadily to 25% until illegal immigration across the
southern border was stopped, Trump tweeted late on Thursday.
Mexican President Andres Manuel Lopez Obrador on Friday
urged his U.S. counterpart to back down.
"This comes at a time when companies have to be looking at
alternatives to the Chinese supply chain. Many thought Mexico
would be an alternative, but now that looks in jeopardy," said
Cliff Hodge, director of investments at Cornerstone Wealth.
"The risk is that these tariffs, along with those imposed on
China, push an already soft business cycle into a full-blown
recession."
Wall Street's main indexes are down more than 6 in May,
their worst performance this year, as investors fret over a
protracted U.S.-China trade war and seek safety in government
bonds.
U.S. Treasury yields fell to new multi-month lows, while the
yield curve, as measured in the gap between three-month
US3MT=RR and 10-year bond yields US10YT=RR , remained deeply
inverted. An inversion in the yield curve is seen by some as an
indicator that a recession is likely in one to two years. US/
The broader financial sector .SPSY was under pressure,
falling 1%, while bank stocks .SPXBK slipped 0.95%.
U.S. carmakers and manufacturers were among the worst hit.
General Motors Co GM.N dropped 4.7% and Ford Motor Co F.N
2.9%, pushing the consumer discretionary .SPLRCD sector 1.26%
lower.
At 12:38 p.m. ET the Dow Jones Industrial Average .DJI was
down 267.64 points, or 1.06%, at 24,902.24, the S&P 500 .SPX
was down 29.09 points, or 1.04%, at 2,759.77 and the Nasdaq
Composite .IXIC was down 88.42 points, or 1.17%, at 7,479.30.
Adding to the downbeat mood was Beijing's warning on Friday
that it would unveil an unprecedented hit-list of "unreliable"
foreign firms, as a slate of retaliatory tariffs on imported
U.S. goods was set to kick in at midnight. Tariff-sensitive industrials .SPLRCI declined 1.25%, while
FAANG stocks - Facebook Inc FB.O , Apple Inc AAPL.O , Alphabet
Inc GOOGL.O , Netflix Inc NFLX.O and Amazon.com Inc AMZN.O
- fell between 1% and 2.6%.
Among the 11 major sectors, only the defensive real estate
index .SPLRCR was up 0.70%.
Data showed U.S. consumer prices increased by the most in 15
months in April, but a cooling in spending pointed to a slowdown
in economic growth that could keep inflation pressures moderate.
The report from the Commerce Department supported the
Federal Reserve's contention that recent low inflation readings
were transitory.
Among other stocks, Gap Inc GPS.N tumbled 10.2%, the most
among S&P 500 companies, after the apparel retailer cut its 2019
profit forecast. Constellation Brands STZ.N , which has substantial brewery
operations in Mexico, slid 6%.
Declining issues outnumbered advancers for a 2.53-to-1 ratio
on the NYSE and for a 3.06-to-1 ratio on the Nasdaq.
The S&P index recorded three new 52-week highs and 52 new
lows, while the Nasdaq recorded 12 new highs and 191 new lows.