By Corrie Driebusch and Paul J. Davies
The stalemate between the U.S. and China on a potential trade deal dragged the Dow Jones Industrial Average lower for a fifth consecutive week, its longest such losing streak since 2011.
Escalating rhetoric by politicians about the trade standoff and higher tariffs sparked a broad retreat from companies that rely on sales in China and those that buy supplies from there. Energy companies tumbled as the price of oil posted its worst week of the year on worries about the economic impact of higher tariffs. Meanwhile, investors sought the relative safety of U.S. government bonds, pushing yields at one point to their lowest level in more than a year and a half.
Earlier this month, analysts and traders said they were bracing for a choppy period for U.S. stocks. That prediction has largely played out. So far in May, the Dow industrials have fallen in 10 sessions, compared with eight sessions of gains. But the losses are outsize, and the blue-chip index has dropped 3.8% so far in May.
On Friday, the Dow industrials edged up 95.22 points, or 0.4%, to 25585.69, and it ended the week down 0.7%. The S&P 500 added 3.82 points, or 0.1%, to 2826.06 but fell 1.2% for the week. The Nasdaq Composite gained 8.72 points, or 0.1%, to 7637.01 and finished the week 2.3% lower.
Friday represented a reprieve for all three indexes after steep drop in the prior session. On Thursday, the Dow lost nearly 300 points, the same day the Federal Reserve Bank of New York warned that tariffs imposed on Chinese imports were costing the average household $813 a year.
The slight bounceback on Friday illustrated that even as investors have grown more wary about the effects of the U.S.-China trade standoff on the U.S. and other economies, they remain cautiously optimistic about the future of corporate profits.
The U.S. economy is among the least dependent on international trade, according to Mark Haefele, chief investment officer in UBS's Global Wealth Management division, and the White House is confident that any economic damage to the economy will be limited.
"When it serves his interest, President Trump takes tariffs off as quickly as he puts them on, so things can change quickly," Mr. Haefele said." But we don't see the U.S. or China hurrying to reach a deal, and the risk of miscalculation is growing."
Worries about economic growth slowing due to higher tariffs hit oil prices hard Thursday, with U.S.-traded crude prices dropping 5.7% for their biggest one-day fall since Christmas eve 2018. U.S.-traded crude fell an additional 0.2% on Friday.
Government bond prices slipped and yields rose slightly Friday, rowing back on the trend of investors' growing preference for safety that has pushed yields generally lower all year. U.S. 10-year Treasury yields were back up to 2.327% from 2.296% on Thursday, which was their lowest level since 2017. Yields rise as prices fall.
In Europe, the British pound rose after a week of declines as U.K. Prime Minister Theresa May announced Friday she would resign in two weeks to allow a new leader to try to break log-jammed efforts to agree to a way to leave the European Union.
Global stock markets were also rattled in recent trading sessions. The Stoxx Europe 600 rose 0.5% on Friday, though it ended the week down 1.5%. Germany's DAX rose Friday but ended the week down 1.9%, dragged down in part by Deutsche Bank, which slipped 2.4% on Thursday to close at an all-time low.
In Asia, the Shanghai Composite fell for its fifth consecutive week, while Hong Kong's Hang Seng and the Nikkei 225 declined for their third straight week.
Write to Corrie Driebusch at firstname.lastname@example.org and Paul J. Davies at email@example.com