Wall Street capped a turbulent week with a late-in-the-day rally Friday after shaking off an early slump triggered by the latest escalation in the U.S.-China trade war.
The market fell sharply in the early going after the United States raised tariffs on $200 billion worth of Chinese goods when negotiators failed to reach a deal. Hours later, remarks from President Trump and Treasury Secretary Steven Mnuchin gave investors reason for optimism.
First, Mnuchin told CNBC that the trade talks had been “constructive,” which spurred the market’s rebound. Then, in a tweet, Trump suggested that the tariffs could be removed and that the trade talks “will continue.”
The afternoon pickup led to a broad reversal in the market, leaving only the healthcare sector with a loss. Still, the buying did little to blunt stocks’ overall sharp decline for the week. The benchmark Standard & Poor’s 500 index posted its biggest weekly loss of the year: 2.2%.
“Nobody wants to sell too aggressively just in case things get settled and the market rallies,” said J.J. Kinahan, chief market strategist for TD Ameritrade. “As long as they’re still talking, there’s a chance that this [trade deal] gets done.”
The S&P 500 index rose 10.68 points on Friday, or 0.4%, to 2,881.40. The index, which earlier in the day was down 1.6%, has given back much of the gains it made in April. It’s still up 14.9% for the year.
The Dow Jones industrial average rose 114.01 points, or 0.4%, to 25,942.37. It was down as much as 358 points earlier in the day. The technology-heavy Nasdaq composite edged up 6.35 points, or 0.1%, to 7,916.94, coming back from a decline of as much as 1.9%.
The Russell 2000 index of smaller-company stocks also closed higher after being down much of the day. It ticked up 2.94 points, or 0.2%, to 1,572.99. Major indexes in Europe closed mostly higher.
Bond prices fell. The yield on the 10-year Treasury note rose to 2.47% from 2.45%.
The higher tariffs levied by the United States, and China’s response that it would take “necessary countermeasures,” on Friday rattled investors, who had been hoping for a quick resolution to the dispute. Confidence in that outcome had eased investors’ concerns this year, along with a more patient Federal Reserve and solid economic data. It all added up to help push stocks to their hottest start to a year in decades.
The trade war has stressed consumers and companies with higher costs on goods. The latest tariff increase raises tariffs to 25% from 10% on $200 billion of Chinese imports. Trump has signaled that he might expand penalties to all Chinese goods shipped to the United States.
The reaction in the stock market this week has been sharp, but the S&P 500 remains within 2.2% of the record high it set April 30.
That’s because many investors continue to expect the United States and China to come to an agreement eventually, said Anthony Saglimbene, global market strategist at Ameriprise Financial. Neither country would benefit from not getting a deal, he said. In the meantime, the U.S. job market continues to grow, and American households’ balance sheets remain better than before the Great Recession.
“We have advised long-term investors to look through the noise of the next few weeks and what goes on with trade because the economy is strong and earnings should grow better than expected,” Saglimbene said. “I wouldn’t expect the market would go down 5 or 10% just because we put these tariffs on. I would expect it would decline 5 or 10% if the trade tensions are escalating.”
Things, though, could get dicier not only if the U.S.-China talks break down but also if the trade war intensifies on other fronts. The United States may be nearing a decision on whether to impose tariffs on imports of European automobiles, for example.
The market’s gains have been slow but steady most of the year. Before this week, the S&P 500 had only four losing weeks this year, most of them minor. Other than that, it has been mostly up during this muted year with no major market-moving news. Investors have been cautiously watching corporate earnings and have been mostly surprised by solid results, though several big companies, including Mylan, TripAdvisor and Wynn Resorts, fell sharply after disclosing disappointing earnings or outlooks.
Symantec sank 12.5% on Friday after the security software maker’s CEO abruptly resigned and the company issued a weak profit forecast for the current quarter.
The slump this week has been especially hard on technology stocks, which have far outpaced the rest of the market this year. Those companies do a lot of business in China and would stand to lose greatly if the trade war drags on.
The Nasdaq slid 3% this week after an even stronger run this year than the S&P 500. The weekly drop is only its third this year and its biggest since late December. The Nasdaq is still up 19.3% in 2019.
Uber had an inauspicious debut on the stock market. The giant ride-hailing company’s hotly anticipated stock offering landed with a flop as its shares slid as low as $41.06 in very heavy volume shortly after trading opened. That was well below Uber’s initial offering price of $45 a share. That price was already at the low end of its targeted price range. It ended the day at $41.57, a drop of 7.6%.
Investors are cautious about Uber after its main rival, Lyft, had a roller-coaster stock market debut March 29. Lyft initially surged well beyond its IPO price, but then slumped on its first full day of trading. That stock closed Friday at $51.09, down 7.4% on the day and well below its IPO price of $72.
Energy futures finished mostly higher. Benchmark U.S. crude slipped 0.1% to settle at $61.66 a barrel. Brent crude, the international standard, rose 0.3% to $70.62 a barrel.
Wholesale gasoline rose 0.7% to $1.99 a gallon. Heating oil rose 0.3% to $2.05 per gallon. Natural gas rose 0.9% to $2.62 per 1,000 cubic feet.
Gold rose 0.2% to $1,287.40 an ounce. silver rose 0.1% to $14.79 an ounce. Copper inched up 0.1% to $2.77 a pound.