10-Year Note's Thursday Drop Signals Recession Worry

The bond market is growing increasingly worried about the prospects of recession. That is the screaming signal from the drop in the 10-year yield Thursday, and the reason that the stock market sold off so much.

The 10-year yield dropped to a fresh 2-year low of 4.16%, and economically sensitive stocks were sold across the board. Everything from financials to energy stocks were hit.

I am not in the recession camp, but if this market can't lift, it will likely mark a shift in character. Still, I think it is a little early to call this bull market over.

And with every single yield along the curve below 4.2%, what is the Fed doing with the fed funds rate at 4.50%?!?

Here is what the Fed's Hoenig had to say today in his comments:

• Fed's Hoenig says U.S. economic outlook uncertain
• Fed's Hoening says impact of housing on economy wider than merely 6% share of GDP; says not seen decline in U.S. housing prices now being seen since early 1990s
• Hoenig says global growth, demand for U.S. goods has helped mitigate impact of housing decline on economy
• Hoenig says over next year expect GDP to grow around 2%
• Hoenig says dollar's decline could add to inflationary pressures
• Hoenig says was very supportive of Sept rate cut; says "right now I'm more in a wait-and-see mode"
• Fed's Hoenig says weaker data, housing mkt may require Fed action
• Hoenig says Fed ready to provide liquidity to market as Fed did in August