By Alexander Osipovich and Avantika Chilkoti 

U.S. stocks turned lower Friday on reports a Chinese delegation has canceled a U.S. farm visit, reigniting trade fears that have spooked investors in recent months.

The Dow Jones Industrial Average dropped about 100 points, or 0.4%, while the S&P 500 fell 0.4%. Both indexes are within about 1% of their closing record highs reached in July. The Nasdaq Composite declined 0.8%.

Industrial stocks were among the hardest hit, falling 0.6% in the S&P 500, after Reuters and other media reported that a Chinese delegation has canceled a farm visit to Montana and officials are returning to China sooner than expected.

Investors have been particularly sensitive to trade-related headlines in recent weeks amid signs that an overseas slowdown is speading to the U.S.. Mid-level trade talks resumed Thursday, ahead of higher level talks that were slated to start next month.

Stock markets have been generally quiet this week, despite turmoil in money markets and an attack on oil facilities in Saudi Arabia that triggered dramatic swings in crude prices.

Much of investors' focus has been whether the Fed -- internally divided and under pressure from President Donald Trump -- will continue to ease monetary policy and push stocks higher.

In addition to cutting interest rates Wednesday, the Federal Reserve said it would consider at its next meeting whether it should allow its balance sheet to resume growth. The move wouldn't mark the start of a new bond-buying program as a stimulus measure, but a return to the normal precrisis practice of letting the Fed's balance sheet grow in line with the broader economy.

Although investors have cheered the Fed's two rate cuts this year, uncertainty over whether easing will continue is holding stocks back, said Michael Arone, chief investment strategist for State Street Global Advisors.

"We're just below an all-time high, and yet there is this anxiety and lack of conviction," said Michael Arone, chief investment strategist for State Street Global Advisors. "One of the factors behind that is that the Fed continues to baffle investors."

Stock moves were muted this week, but volatility broke out in the oil market and an obscure corner of the financial system that banks rely on for short-term funding.

Rates on short-term repurchase agreements briefly jumped to nearly 10% at the beginning of the week. The spike was caused by technical factors: corporate tax payments came due to the U.S. Treasury just as Treasury debt auctions settled, leading to large transfers of cash from the banking system.

That prompted the Fed to step in to relieve funding pressure in the money markets, the first time it had done so since the financial crisis. The central bank pledged to give the financial system another $75 billion boost Friday and to continue such interventions through at least Oct. 10.

U.S. crude oil rose 1.2% to $58.88 a barrel on Friday after days of major price swings. Following an attack on key Saudi production facilities last weekend, oil futures spiked nearly 15%--their largest one-day move in years. But since then they have pared gains as Saudi officials have pledged to restore production to regular levels.

"The price of oil might be capped due to the fundamental slowdown in growth we see around the world, whether that be Europe or the world's second-largest economy, China," said Marshall Stocker, director of country research at Eaton Vance.

Netflix was one of the worst-performing stocks in the S&P 500 on Friday, down 5.9%. The streaming company has been under pressure in recent months amid a decline in its U.S. subscribers.

Overseas, the benchmark Stoxx Europe 600 gained 0.3%. In Asia, the Shanghai Composite and Japan's Nikkei both rose 0.2%.

The yield on U.S. 10-year Treasurys on Friday edged down to 1.775%, from 1.777% on Thursday. Gold prices rose 0.2%.

Write to Alexander Osipovich at alexander.osipovich@dowjones.com and Avantika Chilkoti at Avantika.Chilkoti@wsj.com

(END) Dow Jones Newswires

September 20, 2019 13:57 ET (17:57 GMT)

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