By Michael Wursthorn 

The Dow Jones Industrial Average fell 286 points Thursday after the latest flare-up in U.S.-China trade tensions damped investors' expectations of a near-term resolution between the world's two biggest economies.

The blue-chip index recouped some of its losses in the final hour of trading after falling as much as 451 points earlier in the session. Still, 80% of the index's components ended the day lower, from industrial conglomerate United Technologies to retail giant Walmart, after a Chinese official said the U.S. should "adjust its wrong actions" if it would like to continue negotiations.

Anticipating a protracted trade fight between Washington and Beijing, investors retreated to haven assets such as U.S. government bonds, sending the yield on the benchmark 10-year note down to its lowest level since October 2017.

The losses pulled the Dow industrials into the red for the week, continuing a dismal stretch as it hurtled toward its fifth straight weekly loss -- which would be its longest such losing streak since 2011. The Dow has fallen 4.1% in May amid the breakdown in trade negotiations, putting it at risk of posting its first monthly decline of the year.

The latest fears reverberated beyond the major U.S. stock indexes, affecting financial markets around the world. Stocks in Europe fell by their biggest percentage in two weeks after most of Asia's indexes closed lower. And oil futures slid by their biggest percentage of the year.

"Concerns are really starting to set in to make this feel different than the other times," said Larry Peruzzi, managing director of international equity trading at Mischler Financial, referring to the scope of moves across financial markets. "China is digging in and it seems like things are getting worse. It's just putting together a very negative sentiment for the market."

The Dow industrials fell 286.14 points, or 1.1%, to 25490.47. The S&P 500 shed 34.03 points, or 1.2%, to 2822.24, while the Nasdaq Composite gave up 122.56 points, or 1.6%, to 7628.28.

Even with Thursday's losses, the Dow industrials and the S&P 500 remain up 9.3% and 13%, respectively, for the year. Much of 2019's gain came after the Federal Reserve decided to hold interest rates steady in January, a decision the central bank appeared to remain comfortable with, according to the Fed's latest meeting minutes released on Wednesday.

But the steady barrage of negative trade developments is showing signs of wearing on investors. Just 24% of investors were bullish about the market, according to the latest American Association of Individual Investors survey, its lowest reading since late December and down from nearly 40% earlier this month. About 36% of respondents believed stocks would likely fall over the coming months, near the survey's highest readings of the year.

Although economic data continues to indicate the U.S. economy is solid, many investors worry that trade tariffs will eventually impede corporate profit growth and stifle broader economic expansion.

Regions elsewhere are already seeing a slowdown, including waning business sentiment in Germany and weakening demand for eurozone exports. And Brexit remains as a potential source of future volatility after a last-ditch attempt by U.K. Prime Minister Theresa May to win support for her Brexit plan looked unlikely to succeed.

"The potential bumps in the road appear to be plentiful, at least in the near-to-intermediate term," said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute, in a recent note.

However, there are signs that some investors may view the dip as a buying opportunity, said Mohit Bajaj, director of exchange-traded fund trading solutions at WallachBeth Capital. There were two large purchases of the iShares Core S&P Total U.S. Stock Market ETF during Thursday's rout, worth a combined $260 million, he said.

Nearly all 11 major S&P 500 sectors fell Thursday, with the exception of utility and real-estate stocks, which investors tend to favor for their dividends during periods of economic uncertainty.

Most technology stocks traded lower after several more companies backed away from Huawei Technologies in the wake of U.S. trade restrictions against the Chinese telecommunications giant. U.K.-based chip-design company Arm Holdings is suspending business with Huawei, The Wall Street Journal reported. Some mobile-phone carriers in Japan and the U.K. have also suspended launches of Huawei smartphone models.

Shares of Amazon.com and Facebook slid more than 2% each, while Microsoft and Apple both shed at least 1.1%.

The S&P 500's industrial stocks, which are also viewed as affected bystanders in a U.S.-China trade spat, declined 1.6%.

Energy companies posted some of the biggest losses. The sector slid 3.1% due to a 5.7% pullback in front-month Nymex crude for July delivery after the trade spat raised doubts about the near-term appetite for the commodity. Prices settled at $57.91 a barrel, oil's lowest close since mid-March.

Shares of Tesla were among the few stocks to gain some ground Thursday. The electric-car maker's stock added $2.76, or 1.4%, to $195.49 after reports that it had more than 50,000 in net new orders for the current quarter.

Stocks also fell in Europe and Asia. The Stoxx Europe 600 declined 1.4%, its biggest one-day pullback in two weeks. In Asia, the Shanghai Composite slipped 1.4%, Hong Kong's Hang Seng traded 1.6% lower and Japan's Nikkei lost 0.6%.

The yield on the benchmark 10-year U.S. Treasury note, meanwhile, fell to 2.296% -- its lowest level in more than 19 months -- from 2.393% Wednesday. The decline was its biggest since Jan. 3, pushing the 10-year's yield below the yield on the three-month Treasury bill for the first time since May 15 -- a potential harbinger of further economic tumult.

Demand for the debt also was supported by minutes from the Fed's latest meeting minutes, which suggested that while officials expect to hold interest rates steady, they are concerned about the risks to the economy should inflation expectations remain persistently low.

Daniel Kruger, Asjylyn Loder and Will Horner contributed to this article

Write to Michael Wursthorn at Michael.Wursthorn@wsj.com

(END) Dow Jones Newswires

May 23, 2019 17:48 ET (21:48 GMT)