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May 28, 2020, 4:40 p.m. EDT

Dow books a 150-point loss after President Trump says he will hold Friday news conference on China

U.S.-China tensions threaten economic recovery rally after three days of gains

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By William Watts, MarketWatch , Andrea Riquier


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Stocks closed lower Thursday, skidding into negative territory in the final hour of trade, after President Donald Trump said he would hold a news conference on China on Friday, rattling investors who had been enjoying a rally on optimism about an economic recovery from the coronavirus pandemic.

hat are major indexes doing?

The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.88% closed down 147.63 points, or 0.6%, at 25,400.64, well off its intraday high at 25,758.79, a gain of more than 210 points. Meanwhile, the S&P 500 /zigman2/quotes/210599714/realtime SPX -1.12%  lost 6.40 points, or 0.2%, to end at 3,029.73. The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -1.07%  finished 43.37 points, or 0.5%, lower at 9,368.99.

The Tell: Stock-market bull who called the bounce off March lows says economy bottoming, now sees S&P 500 at 3,250 by August

What’s driving the market?

President Trump’s announcement of a news conference on China came amid growing worries that tensions between world’s largest economies may put economic recovery in jeopardy.

The U.S., Australia, Canada and the U.K. governments issued a joint statement Thursday reiterating their “deep concern regarding Beijing’s decision to impose a national security law on Hong Kong,” after China’s parliament, the National People’s Congress passed legislation Thursday that could greatly curtail democratic freedoms.

The U.S. on Wednesday said it no longer considered Hong Kong highly autonomous under a 1992 law, a move that could lead to measures to limit Hong Kong’s trade privileges and open the door to sanctions against individuals the U.S. sees as suppressing civil liberties in the territory.

“I wouldn’t say this is a major downturn to be too concerned about it,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab, of the slide in the stock market on Wednesday.

“Obviously, President Trump has been escalating the rhetoric…but how this all plays out is something that could take time, he said.

“But what’s the U.S. going to do? Launch a military strike against China? I don’t see that happening,” Frederick said.

Still, investors shouldn’t discount those tensions, said Andrew Smith, chief investment strategist of Dallas-based Delos Capital Advisors. “We’re in an inflection point,” Smith told MarketWatch, and it is possible to see pullbacks of as much 5-10% as investors rotate toward smaller-cap, value-oriented names.

Capitol Report: Revoking Hong Kong’s special status is Trump’s ‘nuclear option’ that could trigger irrevocable U.S.-China split, analysts warn

“We’re in what we call a very typical business cycle dynamic,” Smith said. “We have a lot of ground to pick up, a lot of things to fix, but we think everything is moving in the right direction. People shouldn’t worry about valuations. They play second fiddle to market dynamics. Money has to go back to work,” he added.

On the economic front, another 2.13 million Americans filed for first-time unemployment benefits in the most recent week, the Labor Department said. That was in line with the consensus forecast among economists surveyed by MarketWatch.

/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,657.42
-244.56 -0.88%
Volume: 703.89M
Sept. 18, 2020 5:15p
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/zigman2/quotes/210599714/realtime
US : S&P US
3,319.47
-37.54 -1.12%
Volume: 4.09B
Sept. 18, 2020 5:15p
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/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
10,793.28
-116.99 -1.07%
Volume: 5.26M
Sept. 18, 2020 5:16p
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