U.S. stocks bounced off intraday lows but still finished lower Thursday as big losses for the technology and energy sectors dragged on the broader market amid signs that trade tensions between the U.S. and China are escalating.
How did the major benchmarks fare?
The Dow Jones Industrial Average DJIA, -1.11% lost 286.14 points, or 1.1%, to 25,490.47, while the S&P 500 index SPX, -1.19% fell 34.03 points, or 1.2%, to 2,822.24. The tech-heavy Nasdaq Composite Index COMP, -1.58% sank 122.56 points, or 1.6%, to 7,628.28.
Information technology shares fell 1.7%, underscoring the sector’s vulnerability to the trade war. But energy topped the S&P 500’s losers with West Texas Intermediate crude for July delivery CLN19, +1.05% sinking 5.7% to settle at $57.91 a barrel, the lowest most-active contract settlement since March 12, according to Dow Jones Market Data.
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What drove the market?
U.S. investors are beginning to adjust to the idea of a protracted standoff between the U.S. and China as increased trade friction have continued to weigh on the broader market and the technology sector in particular.
Read: Trade standoff between U.S., China may be settling in for the long run
Weakness in global markets spread to the U.S. as investors digested the implications of new U.S. export restrictions placed on Chinese telecom firm Huawei Technologies Co., with The Wall Street Journal reporting that U.K.-chip design company Arm Holdings was halting business with Huawei, sparking volatility overnight.
Meanwhile, China took a hard stance, stressing that trade talks can only continue when the U.S. adjusts its “wrong actions,” said Gao Feng, a spokesperson for China’s Ministry of Commerce, according to translated remarks. He added that the U.S. crackdown on China companies is threatening the “global industrial and supply chain.”
The South China Morning Post also reported that tensions are forcing China to rethink its entire economic relationship with the U.S. That’s as Huawei is reportedly exploring the development of its own operating system if it can’t access that of Alphabet Inc.’s GOOGL, -0.91% Google or Microsoft Corp. MSFT, -1.17%
IHS Markit said its “flash” index of U.S. manufacturers fell to a 9 1/2-year low of 50.6 in May from 52.6 in April, while the firm’s services index dropped to a 39-month low of 50.8 from 52.7.
The Commerce Department said new-home sales declined 6.9% to a seasonally adjusted annual rate of 673,000 in April — in line with forecasts.
The number of Americans applying for first-time jobless benefits fell to 211,000 in the week ended May 18, from 212,000 the week prior. Economists polled by MarketWatch expected a 217,000 reading.
What were analysts saying?
“Continued weak global economic data and the lack of a specific date for the resumption of U.S.-China trade talks are clouding earnings visibility and weighing on risk appetite,” said Alec Young, managing director of global markets research at FTSE Russell, in emailed comments.
“Markets are pricing in the harsh reality that trade tension is more likely to linger than quickly be resolved as had been the consensus expectation anchoring sentiment until late April.” he added. “In addition, the fact that Wednesday’s Fed minutes indicated no rush to cut rates isn’t helping, nor is seemingly endless Brexit uncertainty.”
“The prospect of a speedy conclusion to the current tensions between the U.S. and China continues to recede, and as such the caution of the last few days, runs the risk of turning into a full-blown retreat from those sectors that are likely to be hit the hardest, from further escalations,” said Michael Hewson, chief market analyst at CMC Markets, in a note to clients.
Which stocks were in focus?
Shares of Dow component Apple Inc. AAPL, -1.71% slid 1.7% after UBS cut its price target on the stock from $235 to $225, following the release of its annual survey of smartphone users, which indicated that the time consumers wait before upgrading to a new phone will continue to lengthen. Earlier this week, Goldman Sachs analyst Rod Hall estimated that 29% of the company’s earnings could be at risk if China decided to ban sales of Apple products.
L Brands Inc. LB, +12.84% shares rallied 13% after the parent of Victoria’s Secret reported better-than-expected first-quarter earnings and raised its guidance for the year.
Shares of Best Buy Co. BBY, -4.84% slumped 4.8% after the big-box retailer reported first-quarter earnings that beat Wall Street forecasts, but issued a subdued outlook for the full-year 2019.
Shares of NetApp Inc. NTAP, -8.11% skidded 8.1% after the company reported fourth-fiscal-quarter earnings that fell short of expectations alongside declining revenue.
Shares of Medtronic PLC MDT, +3.24% rose 3.2% after the medical-device company reported better-than-expected earnings for its fourth fiscal quarter.
Shares of Ideaya Biosciences Inc. IDYA, +11.90% jumped 12% to close at $11.19 on the biotech company’s first day of trading on the market. The company sold 5 million shares in its initial public offering to raise $50 million.
Bicycle Therapeutics PLC ADS BCYC, -14.29% slumped 14% to close at $12 in their trading debut. The company priced its initial public offering late Wednesday at $14.
How were other markets trading?
Stock markets in Asia closed lower, with the Shanghai Composite SHCOMP, +0.02% losing 1.4%, Hong Kong’s Hang Seng Index HSI, +0.33% down 1.6% and Japan’s Nikkei 225 NIK, -0.16% falling 0.6%. European stocks SXXP, +0.39% were down 1.2%.
Among commodities, crude prices US:CLU8 fell sharply, while gold GCM19, -0.18% settled at its highest in a week and the U.S. dollar DXY, -0.08% fell against most of its peers.
—Barbara Kollmeyer contributed to this article