The yield of the 10-year U.S. Treasury Note slid 0.44% lower to close at 2.24% on Tuesday, after Turkish fighter jets shot down a Russian warplane near the Syrian border. The middle-east geopolitical tension also took down the yield of the U.S. 2-Year Treasury Note 1.06% to close at 0.93%, driving the yield spread between the 10-year and 2-year Treasury Notes down to 1.31 percentage points, almost the lowest in eight months.

The U.S. Commerce Department said on Tuesday that the second estimate of the third-quarter U.S. gross domestic product (GDP) came in at 2.1% on a year-on-year basis, compared to the advance estimate of 1.5% reported in October, in line with economists' expectations. The upward revision came mostly from the decrease in private inventory investment, which was smaller than previously estimated, meaning businesses accumulated more inventories in the third-quarter than the government thought. This might explain why the U.S. Federal Reserve saw a slowdown in the U.S. industrial production, which fell 0.2% in October, missing the economists’ forecast of a 0.1% gain.

The U.S Commerce Department also reported that the preliminary estimate for corporate profits from current production, adjusted for inventory valuation and capital consumption, decreased $22.7 billion in the third-quarter, in contrast to an increase of $70.4 billion in the second-quarter. According to Reuters, corporate profits, which have been undercut by the dollar's strength and lower oil prices, were down 8.1% from a year ago, the biggest decline since the fourth-quarter of 2008.

Marc Chandler, former Head of Global Markets Strategy at Brown Brothers Harriman, pointed out that, as of November 5, S&P 500 companies that earn over half of their income in the U.S. reported a 4.8% rise in earnings. Those that generate more than half their sales abroad reported a loss of 10.6%. Overall sales for the S&P 500 companies fell 3.7% in the third-quarter, with sales of domestic-oriented companies rising 1% while the more international companies reported a 12.5% decline in sales.

Of the 481 S&P 500 companies that have reported earnings so far, to November 20 for the third-quarter 2015, the blended earnings have declined by 1.6%, according to FactSet. If this is the final blended earnings decline number for the quarter, it will mark the first time since the second-quarter and third-quarter of 2009 that the index has seen two consecutive quarters of year-over-year declines in earnings. 

For the current year 2015, analysts at FactSet estimate that the S&P 500 would post a 3.0% decline in earnings and a 3.4% decline in revenue. This would be the first time for the index to report a year-over-year decline in earnings and revenue on an annual basis since the global financial crisis in 2009.

From our technical viewpoint, the yield of the U.S. 10-year Treasury Note has been moving in a symmetrical triangle chart pattern (SYM TRI) and is about to break down the 2.23 level, or 50% Fibonacci retracement. If the 2.23 level fails, the next support is at 2.04, or the 61.8% Fibonacci retracement level. 

The yield spread between the 10-year and 2-year Treasury Notes has been falling since July 10, at 1.77 percentage points, and is now testing the March 24 support of 1.30 percentage points. Falling spreads may indicate worsening economic conditions in the future, resulting in a flattening yield curve. A very low or negative spread could signal an upcoming recession.