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U.S. Stocks Pare Losses on Auto-Tariff Delay

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05/17/2019 | 10:48am EDT

By Jessica Menton and Will Horner

Stocks pared losses Friday as concerns over trade negotiations between Washington and Beijing were 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 slipped 3 points, or less than 0.1%, to 25928, after falling about 200 points in early trading. The S&P 500 dropped 0.1%, as gains in health-care and consumer-discretionary shares in the broad index helped offset losses in industrial and energy stocks. The technology-heavy Nasdaq Composite fell 0.4%.

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."

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 future 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 posted their biggest one-day losses since Jan. 3 on Monday.

Investors continued to focus on comments from Washington and Beijing after new U.S. tariffs marked a re-escalation of trade tensions and upended hopes the dispute was nearing a conclusion.

On Thursday, China's Commerce Ministry contradicted comments from Treasury Secretary Steven Mnuchin that U.S. negotiators will hold further talks in Beijing at "some point in the near future."

A Chinese spokesman said China "doesn't have a grasp on the U.S. side's plans to come to China for negotiations." He then said the U.S.'s escalation of tariffs had "severely hampered" talks.

"The resurgent trade war is shaking markets," said David Folkerts-Landau, group chief economist at Deutsche Bank, adding that further tariffs would prompt a large market correction. "There is also the possibility of further escalation by the U.S. or a more combustible retaliation from China, either of which would further inflame tensions and elevate risks."

In Friday's action, shares of Deere fell 5.7% 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 2.405% Friday from 2.407% Thursday. The WSJ Dollar Index, which tracks the dollar against a basket of currencies, was flat.

The British pound has fallen against the dollar for five-straight sessions amid growing Brexit uncertainty. It was last down 0.3% at $1.2766. Trade tensions also prompted a slide in the Chinese yuan, which fell 0.4% against the dollar.

In commodities markets, Brent crude oil rose 0.5% to $72.94 a barrel, while gold was flat at $1,286.74 an ounce.

Elsewhere, the pan-continental Stoxx Europe 600 fell 0.5%. 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%.

Write to Jessica Menton at Jessica.Menton@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
CHINA-SHANGHAI COMP 0.50% 3001.98 End-of-day quote.20.18%
DJ INDUSTRIAL 0.07% 26739.68 Delayed Quote.14.54%
HANG SENG 0.09% 28485.02 Real-time Quote.10.11%
NASDAQ 100 0.04% 7731.427262 Delayed Quote.22.10%
NASDAQ COMP. -0.16% 8019.062705 Delayed Quote.21.05%
NIKKEI 225 0.13% 21285.99 Real-time Quote.6.21%
S&P 500 -0.05% 2948.87 Delayed Quote.17.70%
US DOLLAR INDEX -0.42% 96.22 End-of-day quote.-0.48%
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