By Jessica Menton
Stocks lost gains in the final hour of trading Friday as concerns over negotiations between Washington and Beijing were only partially offset by a delay in an expected U.S. decision on whether to impose new tariffs on vehicle and auto-parts imports.
The Dow Jones Industrial Average fell 98 points, or 0.1%, to 25764, after falling about 200 points in early trading and then sitting on modest gains for much of the afternoon. The S&P 500 dipped 0.6%, as losses in energy and industrial shares in the broad index offset gains in utility stocks. The technology-heavy Nasdaq Composite lost 1%.
The Trump administration said Friday it would put off for 180 days a final decision on whether to impose broad tariffs on cars produced by major trading partners including the European Union and Japan, citing national-security concerns.
"The fact that we got this flexibility on auto tariffs is crucial because the market is trying to determine if both sides are taking a hardline approach," said Jeff Sica, chief executive at Circle Squared Alternative Investments. "Some investors are viewing these concessions as a breaking of the stalemate."
Meanwhile, the Trump administration reached a deal with Canada and Mexico that end U.S.-imposed tariffs on steel and aluminum imports, removing a major barrier to the three countries' new trade pact.
A jump in U.S. consumer sentiment also helped boost investors' confidence about the health of the U.S. economy. American household sentiment rose to the highest level since 2004 in May, driven by a brighter outlook for the economy, the University of Michigan on Friday.
Still, all three major indexes are mildly lower for the week, putting the Dow industrials on course for their fourth straight week of losses.
Major averages have retreated from records amid heightened trade tensions between the world's two biggest economies. Stocks rebounded over the past three trading sessions after the Dow and S&P 500 on Monday posted their biggest one-day losses since Jan. 3.
Trade talks between the U.S. and China have stalled this month, with Washington raising tariffs on $200 billion of Chinese goods to 25% from 10% on May 10. The new escalation in trade tensions has upended investors' hopes that the dispute was nearing a swift conclusion.
The spat has also raised investor anxiety over global growth fears. Investors yanked $19.5 billion out of global mutual and exchange-traded funds in the week ended May 15, while bonds added $5.1 billion for their 19th week of inflows, according to a Bank of America Merrill Lynch analysis of data from fund tracker EPFR Global.
"It's been really challenging as an investor to try and figure out which direction things are headed with the U.S.-China trade conflict," said Timothy Chubb, chief investment officer at Girard. "There's a lot of confusion. A lot of investors at this point are sitting on their hands looking to take some profits or rebalance their portfolios, but aren't making a convicted move in one direction or another."
In Friday's action, shares of Deere fell 6.3% after the company lowered its guidance for profit and equipment sales for the current fiscal year as its customers continue to face headwinds in the agriculture industry.
The yield on the benchmark 10-year Treasury note fell to 2.394% Friday from 2.407% Thursday. The WSJ Dollar Index, which tracks the dollar against a basket of currencies, rose 0.2%.
The British pound has fallen against the dollar for five-straight sessions amid growing Brexit uncertainty. It was last down 0.6% at $1.2725. Trade tensions also prompted a slide in the Chinese yuan, which fell 0.5% against the dollar.
In commodities markets, Brent crude oil fell 0.7% to $72.14 a barrel, while gold lost 0.8% at $1,275.90 an ounce.
Elsewhere, the pan-continental Stoxx Europe 600 fell 0.4%. Chinese indexes led Asian markets lower, with the Shanghai Composite falling 2.5% and Hong Kong's Hang Seng falling 1.1%. Japan's Nikkei bucked the trend with a rise of 0.9%.
--Will Horner contributed to this article.
Write to Jessica Menton at Jessica.Menton@wsj.com