Market Snapshot: Dow books a 150-point loss after President Trump says he will hold Friday news conference on China

Stocks closed lower Thursday, skidding into negative territory in the final hour of trade, after President Donald Trump said he would hold a news conference on China on Friday, rattling investors who had been enjoying a rally on optimism about an economic recovery from the coronavirus pandemic.

hat are major indexes doing?

The Dow Jones Industrial Average US:DJIA closed down 147.63 points, or 0.6%, at 25,400.64, well off its intraday high at 25,758.79, a gain of more than 210 points. Meanwhile, the S&P 500 US:SPX lost 6.40 points, or 0.2%, to end at 3,029.73. The Nasdaq Composite Index US:COMP finished 43.37 points, or 0.5%, lower at 9,368.99.

The Tell:Stock-market bull who called the bounce off March lows says economy bottoming, now sees S&P 500 at 3,250 by August

What’s driving the market?

President Trump’s announcement of a news conference on China came amid growing worries that tensions between world’s largest economies may put economic recovery in jeopardy.

The U.S., Australia, Canada and the U.K. governments issued a joint statement Thursday reiterating their “deep concern regarding Beijing’s decision to impose a national security law on Hong Kong,” after China’s parliament, the National People’s Congress passed legislation Thursday that could greatly curtail democratic freedoms.

The U.S. on Wednesday said it no longer considered Hong Kong highly autonomous under a 1992 law, a move that could lead to measures to limit Hong Kong’s trade privileges and open the door to sanctions against individuals the U.S. sees as suppressing civil liberties in the territory.

“I wouldn’t say this is a major downturn to be too concerned about it,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab, of the slide in the stock market on Wednesday.

“Obviously, President Trump has been escalating the rhetoric…but how this all plays out is something that could take time, he said.

“But what’s the U.S. going to do? Launch a military strike against China? I don’t see that happening,” Frederick said.

Still, investors shouldn’t discount those tensions, said Andrew Smith, chief investment strategist of Dallas-based Delos Capital Advisors. “We’re in an inflection point,” Smith told MarketWatch, and it is possible to see pullbacks of as much 5-10% as investors rotate toward smaller-cap, value-oriented names.

Capitol Report:Revoking Hong Kong’s special status is Trump’s ‘nuclear option’ that could trigger irrevocable U.S.-China split, analysts warn

“We’re in what we call a very typical business cycle dynamic,” Smith said. “We have a lot of ground to pick up, a lot of things to fix, but we think everything is moving in the right direction. People shouldn’t worry about valuations. They play second fiddle to market dynamics. Money has to go back to work,” he added.

On the economic front, another 2.13 million Americans filed for first-time unemployment benefits in the most recent week, the Labor Department said. That was in line with the consensus forecast among economists surveyed by MarketWatch.

Orders for durable goods plunged 17.2% in April, the Commerce Department said, a slightly less steep fall than economists had expected, but GDP contracted at an annual 5% pace in the first quarter instead of 4.8%, revised government data showed, slightly worse than anticipated. And home-contract signings fell 21.8% in April, the National Association of Realtors said, the biggest such decline in the history of that metric.

For the week, however, the U.S. stock indexes are higher, riding on optimism over businesses reopening, with shares of technology companies lagging behind after leading the bounce back from March 23 lows on expectations they would be most insulated or even benefit from the lockdown, analysts said. The S&P 500 and Dow were up 2.5% and 3.8% week to date, respectively, while the Nasdaq is up 0.5% this week.

While stocks appear expensive based on forward earnings estimates, “what seems to be priced in at this stage is the economy will recover much faster than previously estimated, the pandemic will soon end and life return back to normal,” said Hussein Sayed, chief market strategist at FXTM in a note.

See: Corporate profits drop in first quarter by most since 2008 Great Recession

Separately, New York Federal Reserve Bank President John Williams, speaking at an online event, said that the central bank has “more powerful” tools than negative interest rates, according to media reports.

Which companies are in focus?

• Shares of social-media companies were in the spotlight after President Trump on Thursday signed an executive order ostensibly to prevent online censorship, a broad government review of private companies’ activities with potentially grave consequences for social-media companies. Twitter Inc. US:TWTR on Tuesday applied a fact-checking notice to his tweets about voter fraud. Twitter shares lost 4.5%, while Facebook Inc. US:FB shares fell 1.6%.
• Dollar General Corp. US:DG shares declined 1.7% even after the company beat estimates amid hearty demand for discount goods.
• Shares of Abercrombie & Fitch Co. US:ANF tumbled more than 8% after withdrawing guidance, missing analyst expectations, and picking up a downgrade from research firm CFRA.
• General Electric Co. US:GE shares tumbled 7% even after the conglomerate said COVID-19 product demand was expected to double in the second quarter.
• Under Armour Inc. US:UA US:UAA Class A shares fell 5.8%, while the Class C stock fell 4.6% after outlining plans to reopen stores.
• Lumber Liquidators Holdings Inc. US:LL shares jumped 5% after its profit beat analyst expectations.
• Burlington Stores Inc. US:BURL shares rose 1.5% even after reporting a wider loss than expected.

How are other markets trading?

In global equities, the Stoxx Europe 600 XX:SXXP index closed 1.6% higher, at 355.47. In Asia, the Nikkei JP:NIK added 2.3%, and Hong Kong’s Hang Seng Index HK:HSI closed 0.7% lower.

The 10-year Treasury note yield BX:TMUBMUSD10Y gained 2.6 basis points to 0.703% as traders interpreted “less-bad” economic data as a reason to rotate toward riskier assets. Bond prices move in the opposite direction of yields.

The greenback lost ground against its major rivals, with the ICE U.S. Dollar index US:DXY down about 0.7%.

West Texas Intermediate crude futures for July delivery US:CLN20 powered 2.7% higher to end at $33.71 a barrel, brushing off earlier doubts about demand. June gold US:GCM20 advanced by about 0.1%, to settle at $1,728.30 an ounce on the New York Mercantile Exchange.

See:Out-of-whack stock and bond prices say something troubling about the coronavirus economy

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