U.S. stocks closed lower on Friday, but well off the lows of the sessions as investors looked past signs of escalating Washington-Beijing trade tensions, an issue that is seen as a major potential headwind but which has thus far been more bark than bite for equities.
How are markets performing?
The Dow Jones Industrial Average DJIA, -0.34% fell 84.83 points, or 0.3%, to 25,090.48, having dropped 280 points at session lows. The S&P 500 SPX, -0.10% lost 3.07 points to 2,779.42, a decline of 0.1%. The Nasdaq Composite Index COMP, -0.19% shed 14.66 points to 7,746.38, a decline of 0.2%.
For the week, the Dow fell 0.9% while the Nasdaq rose 1.3%. The S&P 500 just barely ended in positive territory, up 0.01%, although that was enough to give the benchmark index, along with the Nasdaq, its fourth straight weekly advance.
The day’s trading was split evenly between positive and negative sectors. By far the biggest declining group was energy, which sank 2.1% on concerns about oversupply. Other “cyclical” sectors, or groups tied to the pace of economic growth, also fell on the day. Material stocks fell 0.6% while industrials were off 0.3%. Technology shares lost 0.5%.
The positive industry groups were filled with defensive sectors, which are seen as safer in periods of economic uncertainty, as the growth they offer tends to be lower than the overall economy, but more stable. Consumer staples rose 1.3% while the telecom sector was up 1.2%. Utilities rose 0.7%.
What drove the markets?
President Donald Trump approved tariffs on about $50 billion of Chinese goods, marking the latest escalation in the trade spat between the two countries. Beijing has said it intends to assess tariffs on a corresponding amount of U.S. goods, while Trump said the U.S. would pursue more tariffs if China retaliates. Subsequently, Trump said there was no trade war with China.
Trade tensions have been a major driver of market action over the past several months, though there has been more rhetoric than concrete moves thus far, and the issue hasn’t been enough to derail the general uptrend. All three indexes are solidly higher for June thus far—with gains ranging between 2.3% to nearly 4%—and both the Dow and S&P 500 a few percentage points away from joining the Nasdaq at record levels.
Separately, U.S. traders largely ignored the latest policy meeting by the Bank of Japan. The central bank stuck to its easing policy, keeping short-term interest rate at minus 0.1% and its target for the yield on 10-year government bonds at around 0%. The decision comes just a day after the European Central Bank said it plans to ends its quantitative easing program in December, but will keep rates at record lows at least until next summer.
What are strategists saying?
“People are worried that the trade issue could turn into something much more serious. It’s obviously never good to think you could be entering a trade war with another major economy, and it brings a lot of uncertainty to the equation,” said Robert Pavlik, chief investment strategist at SlateStone Wealth.
“That being said, people are still hopeful that this is a lot of chest pounding and negotiation tactics, as opposed to something more lasting. The market could be in a position to give something back if this persists, but unless things really escalate, I don’t think that will last.”
What’s on the economic calendar?
The Empire State manufacturing survey rose 4.9 points in June to a reading of 25, the highest reading since October. Separately, manufacturing production declined 0.7% in May, while capacity utilization dropped to 77.9% from 78.1% in the previous month.
The University of Michigan’s gauge of consumer sentiment rose to 99.3 in June.
In Federal Reserve speakers, Dallas Fed President Rob Kaplan will appear in a moderated discussion at a Fort Worth Chamber of Commerce lunch at 1:30 p.m. Eastern.
Stock movers
Energy-related stocks were among the biggest movers as crude-oil prices fell, dropping on expectations that the Organization of the Petroleum Exporting Countries and its allies will agree next week to boost output. The Energy Select Sector SPDR ETF XLE, -2.15% sank 2.2% in its biggest one-day drop since Feb. 8.
Among major movers, Exxon Mobil Corp. XOM, -1.50% fell 1.5% while Occidental Petroleum Corp. OXY, -1.21% ended down 1.2%.
Adobe Systems Inc. ADBE, -2.43% lost 2.4% a day after reporting its quarterly results.
Teva Pharmaceutical Industries Ltd. TEVA, -0.08% dipped 0.1% after the drugmaker said it would discontinue the phase 3 trial of its treatment for chronic cluster headaches.
Qualcomm Inc. QCOM, +0.67% extended its cash tender offer for NXP Semiconductor N.V.’s NXPI, +0.13% shares outstanding. This is at least the 25th time that Qualcomm has done so over the past 16 months. Shares of Qualcomm rose 0.7% while NXP inched 0.1% higher.
Etsy Inc. ETSY, +2.14% rose 2.1%, extending a massive surge in Thursday’s session that took it to record levels. The gain came after it raised its revenue outlook and fee structure. The stock has jumped more than 30% this week.
