U.S. stocks closed lower Friday, for the first weekly decline in a month, as investors looked beyond a litany of central-bank decisions of the past week and focused on the state of China-U.S. trade talks.
U.S. stocks turned lower in afternoon trade, dragged lower by the technology sector /zigman2/quotes/207444675/composite XLK +0.58% and consumer discretionary shares /zigman2/quotes/200844504/composite XLY +0.40% after a report that a Chinese delegation had canceled plans to visit farms in Montana as a part of its negotiations with the U.S. delegation.
Traders were also on the watch for any effects of “quadruple witching day” on Wall Street, the simultaneous quarterly expiration of stock-index futures contracts, single-stock futures, and options on stock-index futures and individual stocks, which often spurs higher volumes.
How are markets performing?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.36% sank 160.60 points, or 0.59%, at 26,934.19, the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.45% declined 14.89 points, or 0.5%, to 2,991.90, while the Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.52% fell 65.20 points to reach 8,117.67, a decline of 0.8%.
What’s driving the market?
Wall Street stocks started the trading day higher after reports that President Donald Trump was exempting hundreds of Chinese products from tariffs.
Two negotiating sessions over the two days between the U.S. and Chinese delegations covered agricultural issues and the strengthening of China’s intellectual protections and forced transfer of U.S. technology to Chinese firms, Reuters reported . Some of the Chinese delegation were to visit US farming regions over the weekend but the Montana Farm bureau tweeted that the visit was cancelled.
The cancellation came as U.S.-Chinese trade talks were held in Washington and U.S. President Donald Trump said he wanted a complete trade deal with the Asian nation, not just an agreement for China to buy more U.S. agricultural goods.
The U.S. and China have imposed import tariffs on billions of dollars’ worth of each country’s goods in the past two years, disrupting global manufacturing supply lines, discouraging business investment and slowing economic growth.
Other factors adding some volatility on Friday included “quadruple witching”, while the S&P 500 index, S&P 400 and Sox Semi index will rebalance Friday as well.
In the weeks ahead, investors should brace for a return of “August-like” volatility, said Kate Warne, principal investment strategist with Edward Jones. Warne expects stocks to move higher, “but not on a smooth path,” she told MarketWatch.
Meanwhile, it’s too soon to try to predict the Federal Reserve’s next move, Warne said, after the U.S. central bank cut interest rates by a quarter percentage point on Wednesday for the second time this year. A lot will depend on how trade negotiations play out in October, she said. “There are lots of signs the economy is slowing, but very few signs it’s slowing quickly.”
On Friday St. Louis Federal Reserve President James Bullard explained his dissent from the Federal Open Market Committee’s decision on Wednesday to reduce rates, saying he advocated for a more substantial 50 basis-point cut because he thinks the manufacturing sector already appears to be in recession.
Boston Fed President Eric Rosengren, on the other hand, was one of two hawkish dissenters at the recent meeting, and he explained his opposition to rate cuts in a Friday statement, arguing that additional monetary stimulus would risk inflated asset prices and increased leverage.