By Georgi Kantchev and Akane Otani 

Global stocks and bond yields slid Friday as weak manufacturing data from the eurozone deepened investors' anxiety about the health of the world economy.

Major stock indexes have managed to rally this year despite a slowdown in the global economy, in part because central banks have signaled they will back off plans to normalize monetary policy for the foreseeable future.

But signs that momentum continues to cool across major economies challenged investors, raising questions about whether a soft patch of data could mark the start of a more persistent downturn.

A report Friday showed factory output in the eurozone fell in March at the fastest pace in six years. Germany's 10-year bond yield fell into negative territory for the first time since October 2016, while the yield on the benchmark 10-year U.S. Treasury note slid to 2.444%, a fresh low for the year.

Yields, which fall as bond prices rise, typically retreat when investors are pessimistic about prospects for growth.

In another warning sign, a closely watched yield curve inverted for the first time since 2007. The spread between 3-month and 10-year U.S. Treasurys fell to -0.02 percentage point.

Investors and Fed officials closely watch the dispersion of short- and longer-term yields because the three-month yield has exceeded the 10-year yield ahead of every recession since 1975.

The Dow Jones Industrial Average fell 245 points, or 0.9%, to 25716 after the opening bell. The S&P 500 lost 0.8% and the Nasdaq Composite shed 1%.

"This confirms the softening data tone the market has been observing and central banks have been forced to take note of," said Matt Cairns, strategist at Rabobank.

Now, many say investors are grappling with whether central banks' wait-and-see approach to monetary policy will be enough to avert a global economic slowdown.

Earlier this week, Federal Reserve officials indicated they are unlikely to raise interest rates this year and may be nearly finished with the series of increases they began more than three years ago. On Wednesday, Fed Chairman Jerome Powell suggested the central bank was likely to leave the policy rate unchanged for many months.

This change of tactic by the Fed has divided the market. For some, it is the latest sign that economic growth in the U.S. and around the world is slowing. For others, a more dovish Fed could prolong the bull market.

"The market is polarized: Half thinks we are in a bull market recovery and the other half thinks we are in a bear market rally," said Eoin Murray, head of investment at asset manager Hermes.

To be sure, few believe that in the U.S., a recession is imminent.

Corporate earnings, while cooling, are still expected to post single-digit percentage growth in 2019, according to FactSet. The labor market has added jobs for 101 consecutive months, its longest streak ever, and unemployment remains low.

But the question investors say they are contending with is whether the slowdown in the eurozone could have a ripple effect, hitting profits at multinationals in the U.S.

In one sign of pessimism, many traders have begun to bet that the Fed will go as far as lowering rates soon -- something they haven't done since the midst of the financial crisis in 2008.

Federal-funds futures, used by traders to place bets on the course of monetary, showed the market pricing in a 50% chance of the Fed lowering rates by the end of the year, according to CME Group. That marked the highest probability yet this year.

Write to Georgi Kantchev at georgi.kantchev@wsj.com and Akane Otani at akane.otani@wsj.com

(END) Dow Jones Newswires

March 22, 2019 10:19 ET (14:19 GMT)