U.S. stocks rebounded from early losses on Friday to snap a four-day losing streak after U.S. President Donald Trump and Treasury Secretary Steven Mnuchin said trade talks between the United States and China were “constructive.”
The benchmark S&P 500 index had dropped as much as 1.6 per cent but rebounded from its session lows after Mnuchin spoke positively of the two-day negotiations between the United States and China. It added further to gains after Trump echoed that sentiment in a series of tweets. The index pulled back from the session’s highs, however, after Mnuchin said no further trade talks were planned, according to CNBC.
Even with Friday’s rebound, though, the S&P 500 and the Nasdaq logged their biggest weekly percentage losses of the year.
Recent developments in U.S.-China trade relations, including an increase in U.S. tariffs on $200 billion worth of Chinese goods that went into effect on Friday, have led investors to brace for a potential escalation of the trade dispute between the world’s two biggest economies. That in turn has stoked fears of a global economic slowdown, prompting a flight to low-risk assets such as government bonds.
Yet Friday’s comments from the White House kept some investors hopeful of an eventual trade agreement.
“The market is getting that the statements (from Mnuchin and Trump) are more political than indicative of a change in strategy,” said Oliver Pursche, chief market strategist at Bruderman Asset Management in New York. “Nothing has changed in terms of our investment thesis. In the short term, China needs a trade deal more than the U.S. But in the long term, the U.S. needs it more than China. Effectively, that’s a pretty good balance.”
The Dow Jones Industrial Average rose 114.01 points, or 0.44 per cent, to 25,942.37, the S&P 500 gained 10.68 points, or 0.37 per cent, to 2,881.4 and the Nasdaq Composite added 6.35 points, or 0.08 per cent, to 7,916.94.
For the week, the Dow fell 2.12 per cent, the S&P 500 declined 2.17 per cent and the Nasdaq shed 3.03 per cent.
Canada’s main stock index slipped on Friday, as investors were worried about the U.S.-China trade dispute, with Washington raising tariffs on Chinese goods even as the two sides tried to strike a last-minute deal.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially down 24.20 points, or 0.15 per cent, at 16,297.55.
The declines mirrored a risk-off mode across global stocks on fears that worsening trade tensions between the two largest economies in the world would dent global growth.
The worries overshadowed encouraging domestic data that showed the Canadian economy added a record 106,500 jobs in April, which reinforces market expectations that the Bank of Canada will keep rates steady for now. The April gain far outstripped analysts’ expectations of 10,000 jobs.
Seven of the 11 major S&P sectors were lower, led by a 0.9-per-cent fall in the consumer discretionary index. Gaming company Stars Group Inc. fell 2.7 per cent, giving back gains after a near 15-per-cent rise on Thursday.
The energy sector and materials sector, heavyweights on the main index, fell about 0.7 per cent and 0.4 per cent, respectively.
In New York, Uber Technologies Inc shares dropped 7.6 per cent after having opened below their initial public offering price in the ride-hailing company’s long-awaited market debut.
Symantec Corp shares plunged 12.5 per cent after the antivirus software maker issued a profit warning and unexpectedly announced its chief executive officer would step down.
Shares of chipmakers, which draw much of their revenue from China, finished higher to snap their four-day run of declines, but the Philadelphia semiconductor index fell 5.8 per cent for the week.
Oil prices were mostly steady on Friday, ending the week slightly lower as trade tensions stoked by a U.S. move to hike tariffs on Chinese goods overshadowed tightened global supplies and expectations of rising U.S. refining demand.
Brent crude oil settled 23 cents, or 0.4 per cent, higher at $70.62 a barrel, but posted a weekly loss of 0.3 per cent.
U.S. West Texas Intermediate (WTI) crude futures ended 4 cents lower at $61.66, with a weekly loss of 0.5 per cent.
Growing trade tensions between the world’s two largest oil consumers could affect oil demand. The United States and China together accounted for 34% of global oil consumption in the first quarter of 2019, data from the International Energy Agency showed.
Prices gained some support on Friday as investors anticipated U.S. Gulf Coast and Midwestern refineries, which are coming out of seasonal maintenance, to boost oil demand ahead of the U.S. summer driving season.
“Crude oil has more potential for upside,” said Tom Kloza, chief oil analyst at the Oil Price Information Service. “With Gulf refineries starting up, demand is going to be significantly above supply for the next 100 days or so.”
Investors also focused on tightened supplies following OPEC-led production cuts since the start of the year. Investors believe the Organization of Petroleum Exporting Countries and its producer allies will extend the six-month output-cut agreement in coming weeks.
“We’re waiting to see whether the Saudis signal their extension of the production cut,” in coming weeks, said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut. “The market is finding its next driver.”
Markets have been buoyed further by Washington’s bid to cut Iran’s oil exports to zero. The United States reimposed sanctions on Iran in November after pulling out of a 2015 nuclear accord between Tehran and world powers last year.