Wall Street on Friday capped a choppy week with a second straight weekly loss for the S&P 500 as worries about a potential escalation in a trade war between the US and China erased early gains.
Technology companies led the broad slide as investors weighed a Bloomberg report saying that the administration of US President Donald Trump is considering ways to limit US investments in China, citing unnamed people familiar with the administration’s internal discussions.
Uncertainty caused by the long-running trade war has fueled volatility in the market and stoked worries that the effects of tariffs and other tactics employed by the countries against each other is hampering US economic and corporate profit growth.
The possibility that the US 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,” Charles Schwab Corp vice president of trading and derivatives Randy Frederick said. “That kind of spooked the market.”
The S&P 500 on Friday fell 15.83 points, or 0.5 percent, to 2,961.79, a loss of 1 percent from a close of 2,992.03 on Sept. 20. Even so, it remains just 2.1 percent below its all-time high set in July.
The Dow Jones Industrial Average on Friday dropped 70.87 points, or 0.3 percent, to 26,820.25, sliding 0.4 percent from 26,935.07 a week earlier.
The NASDAQ, which is heavily weighted with technology stocks, on Friday lost 91.03 points, or 1.1 percent, to 7,939.63, diving nearly 2.2 percent from a close of 8,117.67 on Sept. 20.
Investors also shifted money out of smaller company stocks, which on Friday pulled the Russell 2000 down 12.85 points, or 0.8 percent, to 1,520.48, a plunge of 2.5 percent from 1,559.76 a week earlier.
The major US stock indices were holding on to modest gains early on Friday, even after investors sized up mixed economic data on consumer spending and durable goods orders.
The US Department of Commerce said that spending by US consumers last month rose just 0.1 percent, the smallest gain in six months, even as incomes increased at a solid pace.
A separate report showed that orders to US factories for big-ticket manufactured goods rose slightly last month, although a key sector that tracks business investment plans declined.
The economic reports followed data on Thursday indicating that the US economy grew at a modest 2 percent annual rate in the second quarter, a sharply slower pace than earlier in 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 that the US is considering limiting US investments in China.
Wall Street has been very sensitive to the ups and downs in the trade dispute.
“We go right back to the same old negotiating tactics,” Frederick said. “It’s negotiating with a stick, rather than a carrot.”
Negotiators are 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 a recession.
Both sides have this month taken conciliatory steps ahead of the trade talks, moves that stoked optimism among investors.
Chinese importers have set deals to buy US soybeans and pork, while the Trump administration postponed a planned tariff hike on Chinese imports from Tuesday to Oct. 15.
Technology stocks, which are particularly sensitive to swings in the trade conflict, accounted for much of the selling on Friday.
Microsoft Corp slid 1.3 percent and Adobe Inc dropped 2.2 percent.
Micron Technology Inc 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 percent, the biggest decliner on the S&P 500.
Communications stocks also took heavy losses. Twitter Inc lost 2.6 percent and Activision Blizzard Inc fell 3.5 percent.
For some stocks, this week has been their worst of this year.
Facebook Inc was off 6.8 percent for the week after media reports suggesting the US Department of Justice is considering opening an anti-trust investigation into the social media company.
LATAM Airlines Group SA surged 31.1 percent after Delta Air Lines Inc invested US$1.9 billion in the airline, which focuses on Latin American routes. The investment gives Delta a 20 percent stake in the company.
Additional reporting by staff writer
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