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Stocks dive, then claw most of their way back

Stocks dive, then claw most of their way back
Qatar's minister of state for energy affairs, Saad Sherida Al-Kaabi, attends the OPEC conference in Vienna on Thursday. (Joe Klamar / AFP/Getty Images)

U.S. stocks clawed most of their way back from a deep slide Thursday that at one point had wiped out the market's gains for the year.

An early dive briefly knocked nearly 800 points off the Dow Jones industrial average as the arrest of a senior Chinese technology executive threatened to cause another flare-up in tensions between Washington and Beijing.

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The sell-off eased by late in the session, however, after the Wall Street Journal reported that the Federal Reserve is considering breaking with its current approach of steady interest rate increases, favoring a wait-and-see approach. That was a relief to investors worried that the Fed might raise interest rates too fast, which could choke off economic growth.

“The Fed is trying to, in essence, come out and make it clear they are not on a rigid schedule of rate hikes next year,” said Quincy Krosby, chief market strategist at Prudential Financial.

The Standard & Poor’s 500 index fell 4.11 points, or 0.2%, to 2,695.95. Earlier in the day, the benchmark index was down as much as 2.9%.

The Dow fell 79.40 points, or 0.3%, to 24,947.67. The average had briefly slumped as much as 784 points.

The technology-heavy Nasdaq composite reversed an early loss to finish with a gain of 29.83 points, or 0.4%, to 7,188.26.

The Russell 2000 index of small-company stocks fell 3.34 points, or 0.2%, to 1,477.41.

Traders continued to shovel money into bonds, a sign that they see weakness in the economy ahead. The yield on the 10-year Treasury note fell to 2.89% from Tuesday’s 2.92%, a large move.

U.S. stock and bond trading was closed Wednesday because of a national day of mourning for President George H.W. Bush.

Losses by banks and energy and industrial firms outweighed gains by internet and real estate companies.

Citigroup fell 3.5% to $60.06. Halliburton slid 4.7% to $29.79.

Last week, stocks jumped after Fed Chairman Jerome H. Powell indicated the central bank might consider a pause in rate increases next year while it gauges the effect of its credit tightening program.

The Fed has raised rates three times this year and is expected to boost rates for a fourth time at its Dec. 18-19 meeting of policymakers. That steady pace of rate hikes has begun to worry some investors amid growing signs that some sectors of the economy are hurting, including the U.S. housing market. There also has been growing evidence that global economic growth is slowing.

“The market seems right now to be focused on increased risks for a 2020 recession,” said Patrick Schaffer, global investment specialist at J.P. Morgan Private Bank. “It's a very hard market to buy when you see really strong signals that we are indeed late [in the economic] cycle.”

Thursday's initial wave of selling stocks came about as traders reacted to the news that Canadian authorities arrested the chief financial officer of China's Huawei Technologies on Wednesday for possible extradition to the United States. The Globe & Mail newspaper, citing unnamed law enforcement sources, said Meng Wanzhou is suspected of trying to evade U.S. trade curbs on Iran.

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Meng is a prominent member of Chinese society as deputy chairman of the board and the daughter of company founder Ren Zhengfei. China has demanded Meng's immediate release.

The arrest came less than a week after President Trump met with Chinese President Xi Jinping at the Group of 20 summit in Argentina.

Markets rallied Monday on news that Trump and Xi agreed to a 90-day stand-down in the U.S.-China trade dispute. That optimism quickly faded on doubts that Beijing will yield to U.S. demands anytime soon, leading to a steep sell-off in global markets Tuesday.

On Thursday, China's government said it would promptly carry out the tariff cease-fire with Washington. It also expressed confidence that the two nations can reach a trade agreement. The remarks suggest Beijing wants to avoid disruptions from Meng's arrest.

Even so, investors remained skeptical.

“Trade tensions aren't going away,” Schaffer said. “Contradictory statements from the [Trump] administration have given some people a little bit of pause with respect to the optimism that people felt following the Argentina G-20 conference.”

The renewed jitters over the implications that Meng's arrest could have on U.S.-China trade negotiations weighed on overseas markets.

The DAX in Germany dropped 3.5%. France's CAC 40 lost 3.3%. The FTSE 100 in Britain declined 3.1%, its biggest drop since the country held a vote to leave the European Union in June 2016.

Hong Kong's Hang Seng index tumbled 2.5%, Japan's benchmark Nikkei 225 fell 1.9%, and South Korea's Kospi sank 1.6%. Shares also fell in Taiwan and all other regional markets.

Oil prices fell sharply as traders appeared to doubt that an expected production cut by OPEC will be enough to boost the price of crude.

Benchmark U.S. crude dropped 2.6% to $51.49 a barrel in New York. Brent crude, used to price international oils, slid 2.4% to $60.06 a barrel.

The dollar weakened to 112.65 yen from Wednesday’s 113.19 yen. The euro rose to $1.1373 from $1.1342.

Gold rose 0.1% to $1,243.60 an ounce. Silver fell 0.5% to $14.51 an ounce. Copper fell 1.1% to $2.74 a pound.

Wholesale gasoline fell 0.8% to $1.43 a gallon. Heating oil fell 1.6% to $1.86 a gallon. Natural gas slid 3.2% to $4.33 per 1,000 cubic feet.

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