By Michael Wursthorn and Will Horner 

The Dow Jones Industrial Average fell 286 points and Treasury yields dropped to an 18-month low Thursday after the latest flare-up in U.S.-China trade tensions quelled investors' expectations of a near-term resolution between the world's two biggest economies.

Nearly all of the stocks in the blue-chip index fell, from International Business Machine to Johnson & Johnson, after a Chinese official said the U.S. should "adjust its wrong actions" if it would like to continue negotiations, deepening investors' unease that Washington and Beijing are moving further apart on trade.

The losses pulled the Dow industrials into the red for the week, capping off a dismal stretch for the 30-stock index as it hurtled toward its fifth straight weekly loss -- its longest such losing streak since 2011. The Dow has given up 4.3% in May amid the breakdown in trade negotiations, putting it at risk of posting its first monthly decline of the year.

The latest fears reverberated beyond the major U.S. stock indexes, affecting financial markets around the world. Crude-oil futures in the U.S. notched their biggest plunge of 2019, a 5.7% drop.

Stocks in Europe and Asia also fell. Looking to protect their assets, investors sought protection in U.S. Treasurys, sending yields on the benchmark 10-year note to its lowest level since late 2017.

"Concerns are really starting to set in to make this feel different than the other times," said Larry Peruzzi, managing director of international equity trading at Mischler Financial, referring to the scope of moves across financial markets. "China is digging in and it seems like things are getting worse. It's just putting together a very negative sentiment for the market."

The Dow industrials fell 286 points, or 1.1%, to 25491 as of 4 p.m. Eastern time, while the S&P 500 shed 1.2%. The Nasdaq Composite gave up 1.6%.

Still, the Dow industrials and the S&P 500 remain up 9.3% and 13%, respectively, for the year. Much of 2019's gain came after the Federal Reserve decided to hold interest rates steady back in January, a decision the central bank appeared to remain comfortable with, according to the Fed's latest meeting minutes.

But the steady barrage of negative trade developments is showing signs of wearing on investors. Just 24% of investors were bullish about the market, according to the American Association of Individual Investors' latest survey, its lowest reading since late December and down from nearly 40% earlier this month. About 36% of respondents believed stocks would likely fall over the coming months, near the survey's highest readings of the year.

Although economic data continues to portray the U.S. economy as solid, many investors worry that trade tariffs will eventually impede corporate profit growth and stifle broader economic expansion.

Regions elsewhere are already seeing a slowdown, including waning business sentiment in Germany and weakening demand for eurozone exports. And Brexit remains as a potential source of future volatility after a last-ditch attempt by Prime Minister Theresa May to win support for her Brexit plan looked unlikely to succeed.

"The potential bumps in the road appear to be plentiful, at least in the near-to-intermediate term," said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute, in a recent note.

Nearly all 11 major S&P 500 sectors were down in recent trading, with the exception of utility and real-estate stocks, which investors tend to favor for their dividends during periods of economic uncertainty.

Most technology stocks were trading lower after several more companies backed away from Huawei Technologies in the wake of U.S. trade restrictions against the Chinese telecommunications giant. U.K.-based chip-design company Arm Holdings is suspending business with Huawei, The Wall Street Journal reported. Some mobile-phone carriers in Japan and the U.K. have also suspended launches of Huawei smartphone models.

Shares of Amazon.com, Facebook, Microsoft and Apple all gave up more than 1.5%, as investors worry the trade spat will increasingly pressure U.S. technology companies that have a significant exposure to China.

The S&P 500's industrial stocks, which are also viewed as bystanders in a U.S.-China trade spat, gave up 2.2%.

Energy companies posted some of the biggest losses. The sector slid 3.7% due to a 5.9% pullback in U.S. crude oil after the trade spat raised doubts about the near-term appetite for the commodity.

Shares of Tesla were among the few companies to gain some ground during Thursday's trading session. The electric car maker's stock added 0.4% after reports that it had more than 50,000 in net new orders for the current quarter.

The yield on the benchmark 10-year U.S. Treasury note, meanwhile, fell to 2.348%, according to Tradeweb, putting it on pace to close at its lowest level since late 2017. That pushed the 10-year's yield, which falls as prices rise, below the yield on the three-month Treasury bill for the first time since May 15 -- a potential harbinger of further economic tumult.

Elsewhere, the Stoxx Europe 600 dropped 1.4% as investors contended with a drop in business sentiment in Germany and weaker demand for eurozone exports. In Asia, the Shanghai Composite slipped 1.4%, Hong Kong's Hang Seng traded 1.6% lower and Japan's Nikkei lost 0.6%.

Write to Michael Wursthorn at Michael.Wursthorn@wsj.com

(END) Dow Jones Newswires

May 23, 2019 16:19 ET (20:19 GMT)

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