Stocks closed broadly lower on Wall Street Thursday after investors got spooked by a published report that cast doubt on the prospects of a long-term U.S-China trade deal.
Bond prices surged, sending yields sharply lower, as traders turned cautious. The sell-off was a marked shift from a day earlier, when the S&P 500 notched its second all-time high this week.
Despite the sell-off, the benchmark index closed out October with its second straight monthly gain as an easing of trade tensions and surprisingly good corporate earnings gave investors more confidence.
Industrial stocks led the selling Thursday after a published report raised concerns about the prospects of a comprehensive trade deal between Washington and Beijing. That overshadowed remarks by President Donald Trump, who touted Thursday that both sides are working on finding a location to sign “phase one” of the trade deal.
“It’s mainly the concerns about whether there will be some kind of trade deal with China, both the first round and the bigger agreement that, obviously, appears further away,” said Kate Warne, chief investment strategist at Edward Jones. “When there’s good news on trade negotiations, stocks tend to move up, and when there’s bad news or concerns, stocks tend to sell off.”
The S&P 500 index fell 9.21 points, or 0.3%, to 3,037.56. The benchmark index is on track for its fourth-straight weekly gain and is now up 21.2% this year.
The Dow Jones Industrial Average dropped 140.46 points, or 0.5%, to 27,046.23. It had briefly slumped 268 points.
The Nasdaq slid 11.62 points, or 0.1%, to 8,292.36. The Russell 2000 index of smaller company stocks lost 10.40 points, or 0.7%, to 1,562.45.
Major stock indexes in Europe finished lower.
The flood of company earnings reports and a truce between the U.S. and China as the nations work to finalize “phase one” of a trade deal largely put investors’ worries about trade on the backburner this month. But a Bloomberg report Thursday helped put investors in a selling mood. The report, citing unnamed sources, suggested Chinese officials are doubtful that they will be able to reach a comprehensive, long-term trade deal with the U.S.
The world’s two biggest economies have wrangled for more than 15 months over U.S. allegations that China steals technology, forces businesses to hand over trade secrets and unfairly subsidizes its technology companies in an aggressive drive to supplant American technological dominance.
They have imposed tariffs on hundreds of billions of dollars’ worth of each other’s goods in a trade fight that has slowed global economic growth.
Negotiators from both countries are trying to settle details of the phase-one deal, which sidesteps some of the biggest issues dividing the countries.
“You have the Chinese saying, ‘Gee, they’re not sure there’s a possibility for a long-term negotiation here, which is just another reminder that there are big issues still on the table,” said Paul Christopher, head of global market strategy for Wells Fargo Investment Institute. “A phase-one deal is not really much of a deal at all.”
Caterpillar and 3M helped pull industrial sector stocks broadly lower Thursday. Caterpillar fell 1.8% and 3M dropped 2%.
Financial stocks also took heavy losses as bond yields made a significant move lower. The yield on the 10-year Treasury fell to 1.69% from 1.79% late Wednesday.
Yields were already falling in the early going and were given an extra shove lower following a surprisingly weak survey on business activity in the Midwest. A separate report showed that U.S. consumer spending ticked up last month, though it came in below economists’ expectations.
Technology stocks also fell, despite solid gains from Apple following an encouraging earnings report. The iPhone maker rose 2.3%.
Utilities held up better than the rest of the market as investors moved money into safe-play holdings.
Communications stocks also bucked the broader market slide. Facebook gained 1.8% after releasing surprisingly good third-quarter results.
Investors have been assessing a steady flow of earnings and economic reports this week. They will get another batch of economic data Friday with the government’s release of October employment data, though a 40-day strike against General Motors is expected to dampen the jobs snapshot.
Benchmark crude oil fell 88 cents to settle at $54.18 a barrel. Brent crude oil, the international standard, dropped 38 cents to close at $60.23 a barrel. Wholesale gasoline fell 3 cents to $1.63 per gallon. Heating oil declined 3 cents to $1.88 per gallon. Natural gas fell 6 cents to $2.63 per 1,000 cubic feet.
Gold rose $18.20 to $1,511.40 per ounce, silver rose 19 cents to $18.01 per ounce and copper fell 5 cents to $2.63 per pound.
The dollar fell to 107.98 Japanese yen from 108.97 yen on Wednesday. The euro strengthened to $1.1145 from $1.1125.