Stocks lost ground Friday, with equities undercut by worries over a deterioration in U.S.-China relations while investors weighed the prospect for a bounce back in consumer spending after a sharp fall was reported for April due to lockdowns imposed by the coronavirus pandemic.
Investors also await a news conference later Friday by President Donald Trump regarding China’s plans to impose new security laws that would curb Hong Kong’s autonomy.
What are major indexes doing?
The Dow Jones Industrial Average fell 96.88 points, or 0.4%, to 25,303.76, while the S&P 500 declined 6.55 points, or 0.2%, to 3,023.18. The Nasdaq Composite bucked the trend, rising 28.77 points, or 0.3%, to 9,397.76.
The Dow gave up gains late Thursday after Trump announced he would hold a news conference on China, ending down 147.63 points, or 0.6%, at 25,400.64, while the S&P 500 lost 6.40 points, or 0.2%, closing at 3,029.73. The Nasdaq Composite lost 43.37 points or 0.5%, to end at 9,368.99.
Stocks were still on track for solid weekly gains, however. The Dow ended Thursday on track for a 3.8% weekly rise, while the S&P 500 was up 2.5% and the Nasdaq up 3.3%.
What’s driving the market?
A conflict over China’s efforts to crack down on Hong Kong and end anti-Beijing protests could undercut enthusiasm for stocks, analysts warned, but mild losses for futures indicate investors, while focused on the U.S. response, aren’t convinced U.S.-China relations are set to fall apart.
“We think it would be a significant shock to markets were Trump to announce anything that risked the phase one trade deal,” said Jasper Lawler, head of research at London Capital Group, in a note. “Revoking Hong Kong’s Special Status with the U.S. seems unlikely, It wouldn’t help the people of Hong Kong and would be a self-inflicted wound because it would just limit U.S. company access to China.”
Global equities have rallied this week, lifted by optimism over the easing of lockdowns put in place to contain the COVID-19 pandemic and historic stimulus efforts by the Federal Reserve and other central banks as well as fiscal measures by governments. While economic data remains dismal, stock-market bulls said signs of the contraction bottoming out have helped fuel gains, with investors playing down the threat of a second wave of infections later in the year.
In domestic U.S. news, demonstrators clashed with police for a third straight day in Minneapolis amid protests over the death of George Floyd, a handcuffed black man who died while in police custody.
Trump, on Twitter, reacted to the violence, including a tweet that employed a quote from a former Miami police chief who said, “when the looting starts, the shooting starts.” Twitter on Friday flagged the tweet as having “glorified violence,” just hours after the president signed an executive order threatening to strip the company of protections against liability.
On the U.S. economic front, April consumer spending slumped 13.6% but personal income soared by 10.5%, which the Bureau of Economic Analysis said was due to an increase in government social benefits in response to the COVID-19 pandemic, noting that the bulk of the tax rebate checks were issued last month.
The U.S. trade deficit in goods increased by 7.2% in April, according to the Commerce Department’s advanced estimate. The gap in goods was $69.7 billion in April versus a revised $65 billion for March. Economists polled by MarketWatch had expected a deficit of $63 billion for April.
The May Chicago Purchasing Managers Index is set for release at 9:45 a.m. Eastern. A final May reading on the University of Michigan’s consumer confidence index is scheduled for 10 a.m. Eastern; it’s expected to rise to 73.7 versus an April level of 71.8.
Meanwhile, Federal Reserve Chairman Jerome Powell is slated to participate remotely in an event at Princeton University at 11 a.m. Eastern.
Which companies are in focus?
- Social-network companies were expected to remain in focus. Shares of Twitter Inc. were off 0.8%, after a drop of more than 4% on Thursday. Facebook Inc. shares edged down by 0.2%.
- Shares of Salesforce.com Inc. were 3.6% lower. The enterprise-content platform late Thursday reported fiscal first-quarter results that were largely in line with Wall Street estimates but offered guidance that fell short.
- Costco Wholesale Corp. shares were 1,7% lower after the retailer late Thursday delivered results that missed Wall Street expectations for its fiscal third quarter, during which it spent nearly $300 million in wages and extra sanitation amid the coronavirus pandemic.
- Shares of Dell Technologies Inc. were up more than 6% after it announced following Thursday’s close that the COVID-19 pandemic has boosted its business in certain sectors.
- Cisco Systems Inc. late Thursday announced plans to acquire ThousandEyes, a security-software company, reportedly for close to $1 billion. San Francisco-based ThousandEyes has raised more than $100 million in venture capital to develop software that monitors how a company’s applications are being used on the internet. Shares were up 0.6%.
How are other markets trading?
In global equities, the Stoxx Europe 600 index was off 0.8%. In Asia, the Nikkei fell 0.2%, and Hong Kong’s Hang Seng Index closed 0.7% lower.
The 10-year Treasury note yield fell 3.3 basis points to 0.675% on haven-related buying. Yields fall as bond prices rise.
The greenback lost ground against its major rivals, with the ICE U.S. Dollar index, a measure of the currency against a basket of six major rivals, down 0.2%.
West Texas Intermediate crude for July delivery was down 2%, but on track for the U.S. benchmark’s strongest monthly gain since 2009. August gold advanced around 1%.