Trade worries cut stock rally short
NEW YORK — U.S. stocks finished mostly higher Friday, but they surrendered most of an early gain as worries about rising tariffs once again dampened investors’ enthusiasm as the second quarter came to an end.
The Federal Reserve allowed most of the largest financial institutions in the U.S. to pay bigger dividends to shareholders and buy back tens of billions of dollars in stock. Wells Fargo made its biggest gain since shortly after the 2016 presidential election. Nike had its biggest surge in almost four years after it said sales in North America improved in its latest quarter.
The Commerce Department said spending by consumers rose a disappointing 0.2 percent in May. But wages continued to improve, and Shawn Cruz, manager of trader strategy for TD Ameritrade, said that suggests spending will rise.
The S&P 500 index edged up 2.06 points, or 0.1 percent, to 2,718.37. The Dow Jones Industrial Average gained 55.36 points, or 0.2 percent, to 24,271.41. The Nasdaq composite rose 6.62 points, or 0.1 percent, to 7,510.30. The Russell 2000 index of smaller-company stocks lost 1.95 points, or 0.1 percent, to 1,643.07.
“Investors wanted to see what the potential is for consumer spending in the future,” Cruz said. “Wage growth came in solid enough that there wasn’t a major concern.”
Just before midday, the Dow rose as much as 293 points, but those gains eroded as investors again focused on the trade concerns that have rocked the market since late February. Canada announced $12.6 billion in retaliatory tariffs on U.S. goods in response to the U.S. tariffs on steel and aluminum imports. General Motors warned that if President Donald Trump’s administration places import taxes on cars and car parts, it will likely face retaliation and might have to eliminate jobs in the U.S.
The Federal Reserve allowed 32 of the 35 largest banks in the U.S. to raise their quarterly dividends and buy back more stock. The central bank determined that those institutions are in good enough financial shape to weather a major downturn in the economy.
Wells Fargo gained 3.4 percent to $55.44. While the Fed’s “stress tests” measure a bank’s financial health and are separate from its business tactics, investors felt the Fed’s approval was a notable win for Wells. Earlier this year, the Fed ordered the bank to replace several of its directors and limited its growth in response to abusive practices, including opening accounts in consumers’ names without permission. Those actions duped consumers out of millions of dollars.
Wells Fargo admitted to those practices in 2016 and has since agreed to pay more than $1.5 billion in fines, penalties and legal settlements.
Nike said revenue in North America grew after several quarters of declines, and its fourth-quarter profit and sales blew past Wall Street forecasts. The athletic-apparel company also said it will buy back $15 billion in stock over the next four years. It gained 11.1 percent to $79.68.
With trade tensions in focus throughout the second quarter, stocks didn’t make big gains after a strong round of first-quarter corporate reports. The S&P 500 rose 2.9 percent over those three months, and the Dow added just 0.7 percent.
Investors felt technology companies and smaller, more U.S.-focused companies were safe picks in case the trade tensions get worse. The Nasdaq composite jumped 6.3 percent and the Russell 2000 index advanced 7.4 percent. Both set records as recently as last week.