US STOCKS-Wall Street reels as Trump threatens tariffs on Mexico

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* Major indexes down about 6.5% in May
* Trade-sensitive industrials drop; U.S. automakers tumble
* U.S. Treasury yield curve inversion deepens
* Ten of the 11 major S&P sectors trading lower
* Indexes fall: Dow 1%, S&P 0.94%, Nasdaq 0.97%

(Updates prices, adds comments)
By Shreyashi Sanyal
May 31 (Reuters) - Wall Street's main indexes fell sharply
on Friday, hit by fears that President Donald Trump's shock
threat of tariffs on Mexico could prove the trigger that pushes
the United States 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 later on Thursday.
Mexican President Andres Manuel Lopez Obrador said he would
respond with "great prudence". "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 about 6.5% in May, their
worst performance this year and the trigger for a flood of money
into the bond market that has encouraged expectations of a U.S.
recession.
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 heavily
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 0.95%, while bank stocks .SPXBK tumbled 1.03%.
U.S. carmakers and manufacturers were among the worst hit.
General Motors Co GM.N dropped 4.2% and Ford Motor Co F.N
2.9%, pushing the consumer discretionary .SPLRCD sector 1.17%
lower.
At 11:03 a.m. ET the Dow Jones Industrial Average .DJI was
down 251.00 points, or 1.00%, at 24,918.88, the S&P 500 .SPX
was down 26.26 points, or 0.94%, at 2,762.60 and the Nasdaq
Composite .IXIC was down 73.70 points, or 0.97%, at 7,494.02.
Adding to risks 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 1.1%, 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
- declined between 0.8% and 2.5%.
Among the 11 major sectors, only the defensive real estate
index .SPLRCR was up 0.6%.
Data showed U.S. consumer prices increased in April, which
could support the Federal Reserve's contention that recent low
inflation readings were transitory and allow the central bank to
keep interest rates unchanged for a while. other stocks, Gap Inc GPS.N tumbled 11.1%, 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 6.6%.
Declining issues outnumbered advancers for a 2.76-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 eight new highs and 177 new
lows.