Wall Street’s main indexes fell on Thursday ahead of critical trade negotiations between the United States and China, though they pared losses significantly after U.S. President Donald Trump said reaching a deal this week was possible.
U.S. stocks had fallen more than 1% earlier in the session but recovered much of those losses after Trump said he had received a “beautiful letter” from Chinese President Xi Jinping. Negotiators will meet at 5 p.m. EDT (2100 GMT) on Thursday, Trump said. They are set to continue talks through Friday.
Still, the United States has not backed down from hiking tariffs on $200 billion worth of Chinese goods to 25% on Friday. Trump also said that paperwork had been initiated to levy 25% tariffs on a further $325 billion worth of Chinese goods.
Even with the possibility of further tariffs going into effect, some investors remained optimistic that a trade agreement was within reach. That likely kept Thursday’s declines in check, said John Stoltzfus, chief investment strategist at Oppenheimer Asset Management.
“We may very well see tariffs put in place tomorrow, but it’s going to get resolved,” Stoltzfus said. “It’s too impractical for either side to extend this into a protracted trade war.”
The Dow Jones Industrial Average fell 138.97 points, or 0.54%, to 25,828.36, the S&P 500 lost 8.7 points, or 0.30%, to 2,870.72 and the Nasdaq Composite dropped 32.73 points, or 0.41%, to 7,910.59. The Dow was down 450 points earlier.
The S&P 500 index briefly slipped below its 50-day moving average, a closely watched indicator of momentum, during the session but ended above that level.
Materials and technology stocks posted the steepest declines among the S&P 500’s sectors, dropping 0.8% and 0.7%, respectively.
Shares of chipmakers, which get a large portion of the revenue from China, continued to slide, with the Philadelphia semiconductor index ending 1.2% lower. The index has fallen 6% so far this week and is on pace to post its biggest percentage weekly loss since December.
Chipmaker shares were also pressured by an underwhelming profit growth forecast from Intel Corp. Intel shares fell 5.3% and were the biggest drag on the S&P 500.
Trade-sensitive industrial bellwethers were also hit, with Boeing Co shares falling 1% and 3M Co shares dropping 1.9%.
The CBOE Volatility Index, a gauge of investor anxiety, rose for the fourth consecutive session and is at its highest level in more than three months.
In a bright spot, Tapestry Inc shares jumped 8.5%, the most among S&P companies, after the Coach handbag maker beat quarterly profit estimates and announced a $1 billion share buyback plan.
Chevron Corp shares gained 3.1%, providing the biggest boost to the Dow and the S&P 500, after the oil company said it would not raise its $33 billion offer to buy Anadarko Petroleum Corp.
Declining issues outnumbered advancing ones on the NYSE by a 1.55-to-1 ratio; on Nasdaq, a 1.48-to-1 ratio favored decliners.
The S&P 500 posted two new 52-week highs and 11 new lows; the Nasdaq Composite recorded 37 new highs and 98 new lows.
Volume on U.S. exchanges was 7.75 billion shares, compared with the 6.83 billion-share average for the full session over the last 20 trading days.
Major indexes in Europe and Asia finished lower.
The U.S. government has filed plans to raise tariffs on $200 billion worth of Chinese imports from 10% to 25%. The Trump administration has also threatened to extend 25% tariffs to another $325 billion in Chinese imports, covering everything China ships to the United States.
If the increases take effect as planned, Beijing will impose “necessary countermeasures,” the Commerce Ministry said. It gave no details, but a ministry spokesman said Beijing has made “all necessary preparations,” suggesting it might be bracing for a worsening conflict.
Such moves would mark a sharp escalation in the trade dispute that has raised prices on goods for consumers and companies.
Negotiations are scheduled to continue in Washington on Thursday and to include China’s top trade official, raising some hopes in the markets that there will be a last-minute deal to prevent another round of tariffs.
Technology stocks took sharp losses. Many companies in the sector get much of their revenue from China. The sector slid 0.9%.
Raw material producers also took heavy losses. Real estate stocks eked out a slight gain.
Occidental Petroleum tumbled 6.5% after Chevron pulled out of a potential bidding war with the company to buy Anadarko. Energy companies also fell with the price of oil, as benchmark U.S. crude dropped 0.7% to settle at $61.70 per barrel. Brent crude, the international standard, closed essentially flat at $70.39 per barrel.
CenturyLink skidded 5.2% after the communications provider reported slightly weaker revenue for the latest quarter than analysts expected.
Investors bid up shares in Tapestry after the maker of Kate Spade and Coach handbags beat first quarter profit forecasts and announced a $1 billion stock buyback plan. The stock vaulted 7.9%, the biggest gainer in the S&P 500.
The trade war between Washington and Beijing is nothing new. The U.S. and China have already raised tariffs on tens of billions of dollars of each other’s goods in their dispute over U.S. complaints about Beijing’s industrial and technology policies and a perennial U.S. deficit in trade with China.
But earlier this year, investors were growing increasingly confident that the two sides would eventually find a deal on trade. That helped to calm markets following a tumultuous end to 2018, and the S&P 500 rallied back to a record despite the trade dispute.
A more patient Federal Reserve, which said it may not raise interest rates at all this year, also helped to clear worries about a possible recession, and the S&P 500 vaulted 17.5% higher in the first four months of the year.
But the calm shattered earlier this week after the United States set the Friday deadline for adding more tariffs.
“We need to be prepared for continuing uncertainty in the trade war,” said Kristina Hooper, chief global market strategist at Invesco.
Investors prematurely priced a resolution into the markets, she said, and now it’s likely the additional tariffs will be applied. She said investors still want to believe that a positive resolution is possible and any progress in the negotiations now could “create something of a rally or certainly help stabilize stocks.”
Material from Bloomberg, Reuters and the Associated Press has been used in this report.
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