Wall Street drops as investors await outcome of critical trade talks
NEW YORK: Wall Street’s main indexes were lower on Thursday, as tensions flared up ahead of a high-stakes U.S.-China trade meeting, potentially prolonging a dispute that has threatened global financial markets and economic growth.
President Donald Trump vowed not to back down on hiking tariffs on $200 billion worth of Chinese goods to 25% on Friday unless Beijing “stops cheating our workers”.
However, markets pared losses after Trump said he had received a “beautiful letter” from Chinese President Xi Jinping, as the two-day meeting kicks off in Washington later in the day.
“All this macro uncertainty out there is making investors risk-averse, particularly in an environment that isn’t great,” said Michael Geraghty, equity strategist at Cornerstone Capital Group in New York City.
“The trade tensions are taking down markets with a broad brush. In all likelihood there is going to be a resolution sometime or it could lead to a showdown,” said Stephen Massocca, managing director at Wedbush Securities in San Francisco.
The benchmark S&P 500 index fell below its 50-day moving average, a closely watched level of near-term momentum, during the session.
Technology stocks posted the steepest declines among S&P sectors, slipping 0.85%, dragged down by a drop in shares of iPhone maker Apple Inc and chipmakers, which get a large portion of their revenue from China.
The Philadelphia chip index declined 1.32%, also pressured by a modest profit growth forecast from Intel Corp. The index has fallen 5.9% so far this week and is on pace to post its biggest percentage weekly loss since Dec. 2018.
Trade-sensitive industrial bellwethers were also hit, with Boeing Co, Caterpillar Inc and 3M Co down about 1.5%.
The spike in tensions sent investors scurrying towards safe-haven assets, resulting in a fall in U.S. Treasury yields and the dollar losing ground against Japan’s yen.
The CBOE Volatility Index, a gauge of investor anxiety, rose to its highest level in more than three months.
At 12:37 p.m. ET, the Dow Jones Industrial Average was down 185.46 points, or 0.71%, at 25,781.87. The S&P 500 was down 13.01 points, or 0.45%, at 2,866.41 and the Nasdaq Composite was down 41.24 points, or 0.52%, at 7,902.08.
In a bright spot, Tapestry Inc jumped 9.7%, the most among S&P companies, after the Coach handbag maker beat quarterly profit estimates and announced a $1 billion share buyback plan.
Chevron Corp climbed 2.7% and was the biggest boost to the Dow, after the oil major said it would not raise its $33 billion offer to buy Anadarko Petroleum Corp.
Declining issues outnumbered advancers for a 2.11-to-1 ratio on the NYSE and advancers for a 1.92-to-1 ratio on the Nasdaq.
The S&P index recorded no new 52-week high and 11 new lows, while the Nasdaq recorded 28 new highs and 85 new lows.