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Stocks Close Lower in Final Day of a Bumpy Trading Week

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09/20/2019 | 05:29pm EDT

By Alexander Osipovich and Avantika Chilkoti

Major U.S. stock indexes broke a three-week winning streak, closing with a modest loss after a volatile stretch in the markets.

The Dow Jones Industrial Average suffered a loss of about 1% for the week, which featured turmoil in money markets and dramatic swings in crude prices following an attack on oil facilities in Saudi Arabia.

Still, both the Dow and the S&P 500 are within about 1.5% of their closing records from July.

Friday's session started quietly. But stocks turned lower in afternoon trading on reports that a Chinese trade delegation would be returning home earlier than expected, souring hopes for a trade deal between Washington and Beijing.

Investors have been particularly sensitive to trade-related headlines in recent weeks amid signs that an overseas slowdown is spreading to the U.S. Deputy-level officials were working Thursday and Friday to set the agenda for talks among senior officials tentatively planned for October, The Wall Street Journal reported.

The blue-chip index fell 159.72 points, or 0.6%, to 26935.07. The S&P 500 dropped 14.72 points, or 0.5%, to 2992.07. The Nasdaq Composite slumped 65.20 points, or 0.8%, to 8117.67.

Investors snapped up assets seen as havens. The yield on U.S. 10-year Treasurys fell to 1.754% from 1.901% a week earlier -- the biggest one-week decline in a month. Bond yields move in the opposite direction from prices. Gold prices rose 1.1% for the week.

For the first time since the financial crisis, the Federal Reserve Bank of New York stepped in to relieve funding pressure in the money markets and committed to continuing such interventions through at least Oct. 10.

Rates on short-term repurchase agreements briefly jumped from around 2% to nearly 10% at the beginning of the week. The spike was likely 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.

Meanwhile, Brent crude -- the global oil benchmark -- surged 6.7% this week to $64.28 a barrel after days of major price swings. Following an attack on key Saudi production facilities last weekend, Brent booked its largest-ever one-day percentage gain on record Monday. But since then prices 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.

Much of investors' focus earlier this week was whether the Fed -- internally divided and under pressure from President Donald Trump -- would 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 increase. 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," Mr. Arone said. "One of the factors behind that is that the Fed continues to baffle investors."

Netflix was one of the worst-performing stocks in the S&P 500 Friday, down 5.5%. 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%.

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

Stocks mentioned in the article
ChangeLast1st jan.
CHINA-SHANGHAI COMP -1.32% 2938.14 End-of-day quote.17.63%
DJ INDUSTRIAL -0.95% 26770.2 Delayed Quote.14.76%
NASDAQ 100 -0.93% 7868.490778 Delayed Quote.25.47%
NASDAQ COMP. -0.83% 8089.54332 Delayed Quote.22.93%
NIKKEI 225 0.25% 22548.9 Real-time Quote.12.18%
S&P 500 -0.39% 2986.2 Delayed Quote.19.12%
WTI -0.45% 53.31 Delayed Quote.16.30%
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