U.S. stocks reversed course and fell Friday following a Bloomberg report that the Trump administration is considering limiting investments in China, which could escalate tensions ahead of another round of trade talks next month.
To implement this, the administration is reportedly mulling delisting Chinese companies from U.S. stock exchanges and reducing Americans’ exposure to Chinese investments in government pension funds, according to Bloomberg.
The report pushed down shares of Chinese companies listed on U.S. stock exchanges, including Alibaba (BABA) and Tencent Music (TME).
Here’s where the markets settled Friday:
S&P 500 (^GSPC): -0.53%, or 15.69 points
Dow (^DJI): -0.26%, or 69.24 points
Nasdaq (^IXIC): -1.13%, or 91.03 points
U.S. crude oil prices (CL=F): -1.03% to $55.83 per barrel
10-year Treasury yield (^TNX): -0.1 bps to 1.684%
Gold (GC=F): -0.81% to $1,503.00 per ounce
Each of the three major indices ended lower following a tumultuous week of trade and political developments. Equities extended declines from Thursday amid negative sentiment around trade and the release of a whistle-blower complaint alleging that President Donald Trump and multiple White House officials had worked to “lock down” records of a July call between Trump and Ukraine’s president Volodymyr Zelensky.
The complaint, coupled with Thursday’s testimony by acting intelligence chief Joseph Maguire, fueled House Democrats’ calls for progress in an impeachment inquiry of Trump, after a formal inquiry was first announced Tuesday.
The overhang of the impeachment proceedings could impact markets in the event that it curbs Trump’s ability to move forward with trade negotiations or other geopolitical dealings with economic implications, most analysts have said. This process, however, could take months to unfold.
But at least for now, the U.S.-China trade situation remains about as fluid as it had been before the inquiry announcement. Friday morning, CNBC reported that high-level trade talks between the U.S. and China were set to take place in Washington, D.C. on October 10 and 11, corroborating previous reports that the next round of discussions would take place mid-October.
Earlier this week, stocks had risen after Trump said at the UN in New York that a deal could come “sooner than you think,” and fell following a Bloomberg report Thursday that the Trump administration was not planning on renewing waivers allowing U.S. companies to sell to China’s Huawei.
Micron Technologies (MU), an Idaho-based chipmaker that counts Huawei as a customer, on Thursday cited the trade war as a significant challenge for the business, which derives more than 80% of its revenue from international sources. Shares of Micron declined overnight after it delivered disappointing earnings guidance, despite posting estimates-beating results for the reported quarter.
“We see ongoing uncertainty surrounding U.S.-China trade negotiations,” Micron CEO Sanjay Mehrotra said during a call with analysts. “If the Entity List restrictions against Huawei continue and we are unable to get licenses, we could see a worsening decline in our sales to Huawei over the coming quarters.”
During the reported quarter, Micron had shipped some products to Huawei that the company deemed not subject to the Trump administration’s Entity List restrictions. However, shipments to Huawei still declined quarter-over-quarter, “and were down meaningfully from the levels [the company] anticipated prior to the addition of Huawei to the Entity List,” Mehrotra said.
ECONOMY: Core inflation remained muted in August
Core personal consumption expenditures (PCE), the Federal Reserve’s preferred metric to track underlying inflation, rose at a slower-than-expected pace in August, the Bureau of Economic Analysis said Friday.
Core PCE increased 0.1% in August over the month prior, versus a gain of 0.2% expected by consensus economists and posted in July. Over last year, core PCE rose 1.8%, as expected, from an upwardly revised 1.7% gain in July.
PCE tracks price changes for goods and services, with the core metric excluding fluctuations for the typically volatile food and energy categories.
Headline PCE was flat for the month of August, versus an increase of 0.1% expected. This was down from an increase of 0.2% in July. Over last year, headline PCE rose an expected 1.4%.
Meanwhile, consumer spending slowed in August while incomes rose, the BEA said in a separate report Friday. Personal income increased an expected 0.4% over the month prior, versus a gain of 0.1% in July. Personal spending rose just 0.1%, versus a gain of 0.3% expected. For July, personal spending was downwardly revised to see an increase of 0.5%, from an increase of 0.6% reported previously.
Separately, a core capital goods orders declined in August, according to the Commerce Department’s advance report. This metric encompasses orders for non-defense capital goods excluding aircraft, and serves as a proxy for business investment and capital expenditure.
Core capital goods orders fell 0.2% in August, where a flat reading was expected. July’s previously reported 0.2% gain was also downwardly revised to a flat reading.
However, durable goods orders – or orders for products intended to last three years or more – unexpectedly picked up to 0.2% in August. A decline of 1.1% had been expected. Excluding transportation orders, durable goods rose an even sharper 0.5% over the month prior, reversing a decline of the same magnitude from July and coming in above consensus expectations for a 0.2% gain.
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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