Stocks pared their losses Thursday after President Trump signaled hope for U.S.-China trade talks that began Thursday but the broad market still fell for a fourth consecutive session over additional U.S. tariffs set to take effect early Friday morning.
The development was the latest turn in a market that has swung wildly this week but generally headed south in response to Trump’s tweets and speculation over whether his threats represent a dramatic escalation in the trade war or posturing.
The Dow Jones industrial average closed down 139 points, or 0.54% after tumbling more than 400 points earlier in the day. It closed at 25,828. while the Standard & Poor’s 500 edged down 8.7 points, or 0.3%, to 2,870. The tech-heavy Nasdaq dropped 33 points, or 0.41%, to close at 7,910.
Overall, the market has been “surprisingly resilient,” recouping 70% of its intraday drops each day this week, says Chris Zaccarelli, chief investment officer of Independent Advisor Alliance.
“As long as optimism remains alive … the market can hang in there,” Zaccarelli says. “A severe breakdown in talks will do much more damage to the equity markets, while a breakthrough in trade talks could send them back to all-time highs.”
President Donald Trump said Thursday he received a “beautiful letter” from Chinese President Xi Jinping and would likely speak to him during a critical point in high-stakes trade negotiations between the two countries.
U.S. and Chinese negotiators were scheduled to meet later Thursday, days after Trump threatened new tariffs if China refused to sign onto a new trade agreement.
“We were getting very close to a deal and then they started renegotiating the deal,” Trump told reporters.. “It was their idea to come back. He just wrote me a beautiful letter. I just received it. I’ll probably speak to him by phone.”
Back and forth on trade
Investors’ fears of escalating trade tensions were reignited on Sunday after Trump tweeted that he would increase duties on $200 billion of Chinese imports to 25% from 10%. Another tweet threatened a 25% tariff on $325 billion of goods that are currently untaxed.
On Wednesday night, Trump again threatened harsh tariffs if no agreement is brokered during trade negotiations in a rally in Florida. He said China “broke the deal” in trade discussions.
“You see the tariffs we’re doing?” Trump said. “Because they broke the deal. … They broke the deal. So they’re flying in. The vice premier tomorrow is flying in, but they broke the deal. They can’t do that. So they’ll be paying.”
China’s Commerce Ministry followed up on Thursday with a statement saying the country would impose “necessary countermeasures” if higher tariffs that Trump threatened are enacted on Friday. Gao Feng, a ministry spokesman, later said that China has the “determination and ability to defend its own interests.”
The scheduled trade talks, which were previously supposed to resume on Wednesday, are now Thursday and Friday. Traders don’t typically expect any updates when the negotiations are ongoing.
“But things on Twitter from this administration tend to pop up randomly,” Cook said. “People are watching for those messages.”
No sector is safe
Every sector felt the pressure in Thursday trading. Even utilities, which have practically no exposure to trade issues, were pulled down by the market, Cook said.
Tech was the biggest loser, hurt also by Intel’s disappointing three-year forecast. Shares in Intel closed down 5.3% at $46.62.
The trade uncertainty weighing on stocks comes after the S&P 500 and the Nasdaq hit fresh highs last week. The Dow is down 676 points, or 2.6%, this week while the S&P index is off 2.8%. All three indexes are still up for the year.
Stocks had been on the upswing, thanks to stronger-than-expected earnings, Fed patience on interest rates, low inflation, robust GDP and low unemployment.