Stocks End Mostly Lower as Rally Fades 06/26 16:34
Stocks closed slightly lower on Wall Street Wednesday after an early rally
fueled by optimism over the next round of trade talks between the U.S. and
China lost momentum toward the end of the day.
(AP) -- Stocks closed slightly lower on Wall Street Wednesday after an early
rally fueled by optimism over the next round of trade talks between the U.S.
and China lost momentum toward the end of the day.
The wobbly finish extended the S&P 500 index's losing streak to a fourth
straight day, though the market is still on track to end the month with solid
Losses in health care stocks, consumer goods makers and utilities offset
solid gains in technology sector companies.
Stocks climbed in the morning after U.S. Treasury Secretary Steven Mnuchin
told CNBC that a trade deal between the two nations was "about 90%" done during
recent negotiations. President Donald Trump and Chinese President Xi Jinping
are scheduled to meet at the G-20 summit this weekend and investors hope that
talks will yield progress toward an agreement to resolve the costly trade war.
Initial optimism over the possibility of progress on trade helped drive up
shares in technology stocks, particularly chipmakers. The sector is especially
vulnerable to trade disruptions with China, the world's second largest economy.
The rally began to fade by midafternoon, however, as other sectors piled up
"The market has pulled back its expectations in terms of when an agreement
will be signed and is just focusing on whether or not they can continue on a
viable path toward constructive negotiations," said Quincy Krosby, chief market
strategist at Prudential Financial.
The S&P 500 index dropped 3.60 points, or 0.1%, to 2,913.78. The Dow Jones
Industrial Average fell 11.40 points, or less than 0.1%, to 26,536.82. The
index had been up as much as 111 points.
The Nasdaq composite, heavily weighted with technology stocks, gained 25.25
points, or 0.3%, to 7,909.97. The Russell 2000 index of smaller company stocks
fell 3.26 points, or 0.2%, to 1,517.78.
The market is on track to end June with solid gains that have reversed most
of the losses from a big sell-off in May. Investors pushed stocks higher
through much of this month as they welcomed indications from the Federal
Reserve that it will cut interest rates to keep the economy growing. The trend
sent the benchmark S&P 500 index to an all-time high last week.
Worries of an economic slowdown have also prompted traders to shift money
into less risky assets, such as U.S. government bonds and gold, which is on
track for a 7.8% gain this month.
The multiple trade disputes between the U.S. and other nations, most
prominently China, remain the biggest source of uncertainty looming over Wall
This week's G-20 meeting in Osaka, Japan, is the first opportunity Trump and
Xi have had to discuss their differences on trade face-to-face since Trump said
he was preparing to target the $300 billion in Chinese imports that he hasn't
already hit with tariffs, extending them to everything China ships to the
"The market does not want to see that they leave the G-20 meeting and
there's no hope, no chance for negotiations," Krosby said.
The two sides are in a stalemate after 11 rounds of talks that have failed
to overcome U.S. concerns over China's acquisition of American technology and
its massive trade surplus. China denies forcing U.S. companies to hand over
trade secrets and says the surplus is much smaller than it appears once the
trade in services and the value extracted by U.S. companies are taken into
How the trade war develops could affect whether central banks move to
support their economies. Fed Chairman Jerome Powell this week noted that the
economic outlook has become cloudier since early May amid uncertainty over
trade and global growth. The Fed and the European Central Bank have indicated
they are open to cutting interest rates if needed.
Investors are worried the fallout from the tariffs could hurt global
economic growth and corporate profits. Already, analysts are projecting that
second quarter earnings for S&P 500 companies will be down 1.2%, according to
"You're headed into earnings season and there are real questions about what
is the second quarter story going to have been in the face of what's turning
into a pretty tough environment," said Rob Haworth, senior investment
strategist at U.S. Bank Wealth Management. "The unanswered question for us is:
Are tariffs worse than people think or not? Is the Fed having to help out
because things are a little worse than we expected?"
Health care stocks were the biggest drag on the market Wednesday, with
drugmakers leading the way lower for the sector. Eli Lilly dropped 3.5% and
Nektar Therapeutics slid 3.8%.
Consumer products companies were also big decliners. General Mills slumped
after the packaged foods maker reported weak sales trends in North America. The
stock was the biggest loser in the S&P 500, falling 4.5%.
Even after losing some strength, technology companies led the gainers.
Micron Technology notched the biggest gain in the S&P 500 after the chipmaker
forecast improved demand for smartphone chips the rest of the year. The stock
jumped 13.3%. Other chipmakers also rose. Advanced Micro Devices climbed 3.7%
and Nvidia gained 5.1%.
Energy stocks rose along with the price of U.S. crude oil. Hess gained 5.1%
and ConocoPhillips added 5%.
Benchmark crude oil rose $1.55 to settle at $59.38 a barrel. Brent crude
oil, the international standard, rose $1.44 to close at $66.49 a barrel.
The televised Democratic presidential candidate debates on Wednesday and
Thursday evening may weigh on health care stocks.
Many of the candidates have been arguing for expanding Medicare to cover
uninsured Americans of all ages or some other form of universal health care
coverage that would run counter to the current private insurance market.
"If 'Medicare For All' does not get a lot of air time or if other candidates
criticize the proposal, we think that will be a positive for the market,"
Raymond James analyst Chris Meekins wrote in a research note Wednesday.
Several health care providers were trading lower ahead of the first debate.
UnitedHealth Group slid 1.7%, Anthem dropped 2.2% and Centene lost 3.5%.
Major stock indexes in Europe were mostly lower Wednesday.
In other commodities trading, wholesale gasoline rose 10 cents to $1.97 per
gallon. Heating oil climbed 5 cents to $1.97 per gallon. Natural gas fell 2
cents to $2.29 per 1,000 cubic feet.
Gold rose $1.60 to $1,413.30 per ounce, silver rose 99 cents to $15.28 per
ounce and copper fell 3 cents to $2.71 per pound.
The dollar rose to 107.83 Japanese yen from 107.12 yen on Tuesday. The euro
weakened to $1.1370 from $1.1373.