U.S. stocks fall; S&P 500 ends with 2nd straight weekly loss
Wall Street capped a choppy week with a second straight weekly loss for the S&P 500 Friday as worries about a potential escalation in the trade war between the U.S. and China erased early gains.
Technology companies led the broad slide as investors weighed a report saying the Trump administration is considering ways to limit U.S. investments in China. Bloomberg cited unnamed people familiar with the administration’s internal discussions.
Uncertainty over the long-running trade war has fueled volatility in the market and stoked worries that the impact of tariffs and other tactics employed by the countries against each other is hampering U.S. economic and corporate profit growth.
The possibility that the U.S. is weighing another way of applying pressure on China dampened investors’ already cautious optimism that the world’s two biggest economies might make progress as their representatives resume negotiations next month.
“Here we are, just two weeks out, and now we’re doing things to sort of ruffle feathers again,” said Randy Frederick, vice president of trading & derivatives at Charles Schwab. “That kind of spooked the market.”
The S&P 500 index fell 15.83 points, or 0.5%, to 2,961.79. The benchmark index finished the week with a 1% loss. Even so, it remains 2.1% below its all-time high set in July.
The Dow Jones Industrial Average dropped 70.87 points, or 0.3%, to 26,820.25. The Nasdaq, which is heavily weighted with technology stocks, lost 91.03 points, or 1.1%, to 7,939.63.
Investors also shifted money out of smaller company stocks, which pulled the Russell 2000 index down 12.85 points, or 0.8%, to 1,520.48.
Bond prices were little changed. The yield on the 10-year Treasury note held at 1.68%.
The major U.S. stock indexes were holding on to modest gains early Friday even after investors sized up mixed economic data on consumer spending and durable goods orders.
The Commerce Department said that spending by U.S. consumers rose just 0.1% in August, the smallest gain in six months, even as incomes increased at a solid pace. A separate report showed orders to U.S. factories for big-ticket manufactured goods rose slightly in August, though a key sector that tracks business investment plans declined.
The economic reports followed data on Thursday indicating that the U.S. economy grew at a modest 2% annual rate in the second quarter, a sharply slower pace than earlier the year.
The market mostly moved sideways as investors digested the economic data, but it gave up those modest gains by midday as traders learned the U.S. is considering limiting U.S. investments in China.
Wall Street has been very sensitive to the ups and downs in the trade dispute. Stocks rose Wednesday after President Donald Trump told reporters that China wants “to make a deal very badly,” adding that “it could happen sooner than you think.”
That optimism faded from the markets Friday as investors considered the implications of the U.S. weighing more tough measures only a couple of weeks away from new trade talks.
“We go right back to the same old negotiating tactics,” Frederick said. “It’s negotiating with a stick, rather than a carrot.”
Negotiators are due to meet next month in Washington for a 13th round of talks aimed at ending the dispute over trade and technology that threatens to tip the global economy into recession.
Both sides have taken conciliatory steps this month ahead of the trade talks, moves that stoked optimism among investors. Chinese importers have set deals to buy American soybeans and pork. And the Trump administration postponed a planned Oct. 1 tariff hike on Chinese imports to Oct. 15.
Technology stocks, which are particularly sensitive to swings in the trade conflict, accounted for much of the selling Friday. Microsoft slid 1.3% and Adobe dropped 2.2%. Micron Technology led the sector’s slide after the chipmaker issued a weak profit forecast and a sales warning, citing the trade war. The stock slumped 11.1%, the biggest decliner in the S&P 500.
Communications stocks also took heavy losses. Twitter lost 2.6% and Activision Blizzard fell 3.5%.
The market has been in a slump all week as investors pull back amid trade war worries, reports of sluggish economic growth and an impeachment inquiry into President Trump.
The tech-heavy Nasdaq bore the brunt of the selling. It finished the week with a 2.2% loss. Smaller company stocks had a particularly rough week. The Russell 2000 ended the week down 2.5%.
For some stocks, this week has been their worst of the year. Facebook is off 6.8% for the week after media reports suggesting the Department of Justice is considering opening an antitrust investigation into the social media company.