By Avantika Chilkoti and Chong Koh Ping
U.S. stocks wavered Friday as investors braced for President
Trump's response to China's push for tighter security controls on
Hong Kong, which could reignite tensions between the world's two
The S&P 500 slipped 0.2% shortly after the opening bell. The
Dow Jones Industrial Average shed roughly 100 points, or about
0.4%. The Nasdaq Composite added 0.3%.
Despite Friday's moves, major U.S. indexes are on track to end
the month with gains. The S&P 500 has added 3.8% in May, while
the Dow is up 3.9%. The Nasdaq has gained 5.8% this month.
The latest leg of the rally has been underpinned by shares of
companies that were considered the stock market's laggards just
weeks ago. This week, investors turned to shares of financials
companies and cooled toward the tech giants that had propelled the
market higher since its lows in March. Financials companies in the
S&P 500 have jumped 6.6% this week, while the information
technology sector has inched up 0.4%.
To many, the climb in value stocks, which typically trade at a
low multiple of their book value, was a sign that investors are
bracing for a broader economic recovery ahead. But the sharp rally
in the gauge this week came to a stuttering halt on Thursday after
Mr. Trump said he would hold a press conference on China on
China and the U.S. have been on a collision course in recent
days following Beijing's moves to clamp down on antigovernment
protesters in Hong Kong by imposing national-security laws on the
city. Fresh U.S. measures targeting trade and Chinese companies
could weigh on both economies at a time when they are already
struggling with the coronavirus pandemic, analysts said.
Mr. Trump could review Hong Kong's special status and leave the
city facing the same tariffs as mainland China, according to James
Athey, a portfolio manager at Aberdeen Standard Investments.
Washington has signaled this week that it may declare that it no
longer considers Hong Kong autonomous from Beijing.
"It would essentially change the business environment for U.S.
companies operating in Hong Kong, so that would be a significant
step and not one that we could discount," said Mr. Athey.
Mr. Trump could also take broader punitive measures against
China, he said. "He can saber rattle and increase tensions with
China directly, rescinding the phase-one deal and going back into
the playbook of 2019."
Any U.S. measures on trade or against Chinese companies, and any
Chinese retaliation, could have a greater impact than previous
actions taken before the new coronavirus battered both economies,
according to Colin Low, senior macro analyst at FSMOne.com in
The pan-continental Stoxx Europe 600 dropped 1.1%. Most major
Asia-Pacific equity benchmarks closed lower, while the Hong Kong
gauge lost 0.7%.
Bond markets reflected the erosion in investors' risk appetite.
The yield on the benchmark 10-year U.S. Treasury note edged down to
0.672%, according to Tradeweb, from 0.703% Thursday. Yields fall as
bond prices rise.
Shares of some individual companies recorded bigger moves. Dell
Technologies rallied 7.3%. The computer maker on Thursday said the
pandemic has boosted its business in certain sectors. Software
maker VMware, which is majority owned by Dell, climbed 7.9% after
its earnings topped Wall Street's expectations.
Salesforce.com dropped 4.7% after the business-software maker
cut its full-year earnings outlook.
Fresh data Friday showed that U.S. consumer spending fell by a
record 13.6% in April during coronavirus lockdowns. But there are
signs that purchasing is starting to pick up as states start to
reopen businesses and Americans return to work.
The University of Michigan's closely watched consumer-sentiment
survey for this month will be reported at 10 a.m. Investors are
also likely to be watching closely for Federal Reserve Chairman
Jerome Powell's comments at 11 a.m.
Market sentiment could be shifting on a realization that
government support won't be enough to prevent job cuts, and that
reinfection rates could rise as people get back to work, according
to Mike Bell, global market strategist at J.P. Morgan Asset
"If you do see infection rates reaccelerate, then that could
call into question the existing market narrative that we're now on
the path of sustainable reopening," said Mr. Bell.
In commodities, Brent crude, the global gauge of crude-oil
prices, fell 1.8%.
In the Asia-Pacific region, Japan's Nikkei 225 closed 0.2%
lower, while Australia's S&P/ASX 200 retreated 1.6%.
Gunjan Banerji contributed to this article.
Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com and
Chong Koh Ping at email@example.com
(END) Dow Jones Newswires
May 29, 2020 10:09 ET (14:09 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.