China tensions, layoffs drive stocks down

Stocks closed broadly lower for the second day in a row Friday as Wall Street gave back some of its gains from a mostly solid July rally.

Technology and health care companies accounted for much of the selling, with chipmaker Intel posting the biggest drop in the S&P 500.

“Investors are already wondering whether prices are too high and then you get a little bit of tension with China, you get a little bit of disappointing news from Intel, and that just sort of feeds on itself,” said Mike Zigmont, director of trading and research at Harvest Volatility Management.

The coronavirus pandemic remains the most dominant force in markets, with its potential to destroy lives and economies. But other risks also are bubbling up, headlined by Friday’s worsening relations between the United States and China.

Investors also are concerned about a recent uptick in layoffs as spiking coronavirus counts across the Sun Belt lead more businesses to shut down.

Extra benefits for those out-ofwork Americans from the federal government are set to expire soon, and worries are rising about whether Congress can reach a deal on more aid for the economy.

Despite all those challenges, the S&P 500 remains only about 5 percent below its record set in February, after roaring back from an earlier, nearly 34 percent plummet. This week’s stall for the S&P 500 follows three straight weekly gains driven by hopes that the economy was regaining its footing. Underlying it all is massive aid for the economy promised by the Federal Reserve, including record-low interest rates.

“The Fed is the big story behind this market, that and the liquidity it’s provided,” said Teresa Jacobsen, managing director at UBS Private Wealth Management. “It gives a great deal of support for upside in the market. But, there are momentary blips when we pause and give a little back.”

On Friday, the blip came after China’s Foreign Ministry ordered the closure of the U.S. Consulate in the western city of Chengdu. It echoes a similar move earlier this week by the United States to close the Chinese Consulate in Houston.

Such moves have investors on edge because of how viciously markets swung in prior years when President Donald Trump was pressing his trade war with China, before they agreed to a temporary truce early this year.

“Alongside the eviction of the Houston Chinese Consulate, the risk of the U.S.-China conflict escalating into a ‘Cold War’ is worrying,” said Hayaki Narita of Mizuho Bank.