Wall Street took a battering on Wednesday, suffering its worst day so far this year after movements in the bond market signaled the sharpest indication yet of an approaching recession.

The Dow Jones Industrial Average, which had already shed 400 points at the opening bell, spent the day in freefall before closing with a decline of 800 points, a drop of over 3 percent. The S&P 500 closed down 2.93 percent, and the Nasdaq posted a decline of 3.02 percent.

The market selloff was the result of an inverted yield curve in government bonds — a phenomenon that has preceded every recession for the past 50 years.

President Donald Trump blamed the Federal Reserve for the market plunge, calling Fed Chairman Jerome Powell “clueless” in an afternoon tweet. Trump has consistently lambasted Powell for not cutting rates at a faster pace.

The steep declines came after the yield on the benchmark 10-year Treasury note fell below the 2-year rate for the first time since 2007. That phenomenon, known as an inverted yield curve, has predicted every recession since the 1960s, and is a demonstration of mounting concern among investors that the sluggish global economy will take its toll on U.S. economic growth.

When bond yields drop this low, it is a firm signal of the income appetite of investors, who shift towards less risky assets that do not expose them to market vulnerability.

"Spread is way too much as other countries say THANK YOU to clueless Jay Powell and Federal Reserve," President Donald Trump tweeted on Wednesday afternoon, aiming his criticism once again at Federal Reserve Chairman Jerome Powell, who Trump believes has slowed the economy by not cutting interest rates at a faster pace.

"Germany, and many others, are playing the game! CRAZY INVERTED YIELD CURVE! We should easily be reaping big Rewards & Gains, but the Fed is holding us back. We will Win!" Trump added.

The yield curve marks the difference between how much it costs to borrow over the short term versus the long term. Banks borrow money at a lower short-term rate and then offer those funds to borrowers at a higher rate. When that dynamic is thrown off, it means less profit for banks, leading to tighter lending — and that, in turn, means companies can put their spending plans on hold, freeze hiring, or even lead to layoffs.

Consequently, shares in banks took the biggest hit, with Citigroup down by just over 5 percent and JPMorgan falling almost 4 percent.

While the time frame from yield curve inversion to recession can vary — it has taken anywhere from two to six quarters after an inversion for a recession to occur — all of the past recessions have been preceded by inversions of the yield curve.

“It’s a dangerous and upsetting harbinger of the future of the economy,” said Dan North, chief economist at Euler Hermes North America, when the curve flattened out earlier this year. “Typically, when the yield curve inverts for even a short period of time, we enter a recession about a year later,” he said.

Ongoing geopolitical turmoil, including President Donald Trump’s monthslong trade war with China and the still-unresolved crisis over Brexit, remains a key threat to the historic economic expansion in the U.S.