By Alexander Osipovich and Joe Wallace
A rally in U.S. stocks came to an abrupt halt Thursday after
President Trump said he would hold a press conference on China,
raising jitters about a fresh standoff between the world's two
largest economies.
The Dow Jones Industrial Average fell 147.63 points, or 0.6%, to
25400.64, reversing course after two days of gains earlier this
week.
The blue-chip index had been up more than 210 points prior to
Mr. Trump's comments on Thursday afternoon. The president said he
would announce a response to China's push for tighter security
controls on Hong Kong.
The S&P 500 gave up its gains to close down 6.40 points, or
0.2%, to 3029.73. The technology-heavy Nasdaq Composite declined
43.37 points, or 0.5%, to 9368.99.
Recent moves by Washington and Beijing have fueled concerns
about a renewed U.S.-China trade war, even as both economies are
still reeling from the impact of the coronavirus pandemic.
China forged ahead Thursday with a resolution to impose
national-security laws on Hong Kong in a bid to crush anti-Beijing
protests. That came a day after the House of Representatives passed
a bill to sanction Chinese officials involved in the suppression of
Muslim minority groups, and the State Department determined that
Hong Kong no longer has a high degree of autonomy from China -- a
move that could open the way for Mr. Trump to revoke special
arrangements on trade.
"It's just another potential concern on top of Covid," said
Brian O'Reilly, head of market strategy at Italian asset manager
Mediolanum. "Whether we actually get into trade war 2.0 -- I think
even in a second term for Trump, they'd be reticent to go down that
path."
Hong Kong's Hang Seng Index fell 0.7%, even as most other Asian
and European indexes posted gains. The pan-continental Stoxx Europe
600 rose 1.6%, while Japan's Nikkei 225 jumped 2.3%.
New data Thursday showed U.S. workers filed just over 2.1
million jobless claims last week, extending a downward trend, but
still at sharply elevated levels from before the pandemic.
States and cities have been moving ahead with plans to let
businesses reopen, fueling hopes that the economy has turned a
corner. Fresh data showed U.S. gross domestic product fell at a 5%
rate in the first quarter, slightly steeper than initially
estimated and the largest quarterly rate of decline since the last
recession.
"There is some optimism that the U.S. economy is moving
forward," said Jeffrey Schulze, an investment strategist at
ClearBridge Investments. "It's also important that there are no
signs of a second wave of infections."
In corporate news, Dollar Tree shares jumped $10.11, or 12%, to
$97.64 after the discount retailer posted stronger-than-expected
earnings for the first quarter, boosted by a surge in demand for
essential goods as homebound consumers stocked up during the
pandemic.
Shares of Boeing rose 30 cents, or 0.2%, to $149.82 after the
aerospace giant laid out plans to cut more than 13,000 jobs.
HP shares fell $2.11, or 12%, to $15.01 after the
information-technology company's first-quarter profit fell and it
pulled financial projections for the year.
Major U.S. indexes have recovered in recent weeks to levels last
seen in early March. Now, a key question for investors is whether
economically sensitive stocks can extend their recent rally, said
Hugh Gimber, a strategist at J.P. Morgan Asset Management.
"It's been the most beaten-up sectors that have really caught
the bounce, " he said, pointing to gains for shares in U.S. banks
and travel companies.
The rally in shares of technology companies has paused in recent
days, having powered much of the recovery in U.S. stocks since
March. They could come under further pressure from an executive
order that Mr. Trump signed on Thursday. The order seeks to limit
the broad legal protection that federal law currently provides
social-media and other online platforms.
Twitter shares dropped $1.47, or 4.4%, to $31.60. Mr. Trump
lashed out at the company this week after it added fact-checking
notices to two of his tweets.
Stocks are likely to pull back at some point given the degree of
uncertainty surrounding the global economy as lockdown measures are
relaxed, said Michael Drummey, head of U.S. equity risk trading at
Mizuho Americas LLC. "The market is acting in a way that doesn't
really line up with that uncertainty," he said. "We have a FOMO
rally -- a fear of missing out."
U.S. oil futures rose 2.7% to settle at $33.71, despite a
larger-than-expected increase in U.S. crude inventories.
The yield on 10-year U.S. Treasury bonds rose to 0.703%, from
0.677% on Wednesday, as investors sold government bonds. Bond
yields move in the opposite direction from prices.
Frances Yoon contributed to this article.
Write to Alexander Osipovich at alexander.osipovich@dowjones.com
and Joe Wallace at Joe.Wallace@wsj.com
(END) Dow Jones Newswires
May 28, 2020 16:59 ET (20:59 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.