Friday’s Stock Market Open: US Equities Mixed Ahead of Trump Conference on China Relations

Update: 12:05 p.m. EDT:

U.S. stocks remained mixed by noon on Friday.

The Dow Jones Industrial Average dropped 186.31 points to 25,214.33, while the S&P 500 fell 11.65 points to 3,018.08 and the Nasdaq Composite Index gained 16.72 points to 9,385.71.

Federal Reserve Chairman Jerome Powell said on Friday that the central bank’s Main Street lending facility – designed to lend to small- and medium-sized businesses -- is “days away” from making its first loan.

The Chicago Purchasing Manager's Index fell to 32.2 in May from 35.4 in April.

The University of Michigan's Survey of Consumers said that the final reading of its consumer sentiment index came in at 72.3, up from 71.8 in April.

Original story:

U.S. stocks opened mixed on Friday as investors nervously await a news conference from President Donald Trump on U.S.-China relations. Trump is expected to make a decision on Beijing’s plan to impose a new security law in Hong Kong that would dramatically curtail the city-state’s autonomy.

The Dow Jones Industrial Average dropped 140.44 points to 25,260.20, while the S&P 500 fell 11.44 points to 3,018.29 and the Nasdaq Composite Index edged up 7.84 points to 9,376.83.

After China approved a national security bill for Hong Kong, global leaders condemned the measure.

In a joint statement, U.S., U.K., Australia and Canada, expressed their “deep concern” regarding China’s proposed law.

“Hong Kong has flourished as a bastion of freedom. The international community has a significant and long-standing stake in Hong Kong’s prosperity and stability,” they said. “Direct imposition of national security legislation on Hong Kong by the Beijing authorities, rather than through Hong Kong’s own institutions… would curtail the Hong Kong people’s liberties.”

The move will “dramatically erode Hong Kong’s autonomy and the system that made it so prosperous,” they added.

“Hong Kong’s autonomy must not be undermined,” said Germany’s Foreign Minister Heiko Mass. “The citizens of Hong Kong enjoy freedoms and rights, that are afforded to them through the Basic Law and on the principle ‘one country, two systems.’ We expect that law and order to be upheld.”

“Hong Kong is an extremely important partner for Japan with which Japan maintains close economic ties and people-to-people exchanges,” the Japanese foreign ministry said. “It is the longstanding policy of Japan to attach great importance to upholding a free and open system which Hong Kong has been enjoying and the democratic and stable development of Hong Kong under the ‘one country two system’ framework.”

Analysts fretted over worsening U.S.-China relations.

“A complete breakdown of supply chains and international trade, primarily between the two largest economies [U.S. and China], would justify equities trading drastically lower,” wrote JPMorgan strategist Marko Kolanovic.

The covid-19 pandemic also weighs heavily on market sentiment.

“The market has discounted the coronavirus very quickly and has correctly predicted the apex of the virus,” said Mike Katz, partner at Seven Points Capital. “Having said all that, prices are up there. The S&P 500 trading above 3,000 is pricing in a full recovery. If there is a second wave of the virus that ends up being more detrimental than people think, then I would think the S&P 500 is not valued correctly.”

U.S. personal income grew by 10.5% month-over-month in April. But spending dropped 13.6% month-over-month. The headline personal consumption expenditure price index slowed down to 0.5% in April year-over-year, while the core PCE price index dropped to 1% year-over-year.

The U.S. trade deficit in goods rose by 7.2% in April. The Commerce Department also reported a 0.4% rise in advanced wholesale inventories and a 3.6% decline in advanced retail inventories.

Overnight in Asia, markets finished mixed. The Shanghai Composite edged up 0.22%; Hong Kong’s Hang Seng fell 0.74%; while Japan’s Nikkei-225 slipped 0.18%.

In Europe markets traded lower, as Britain’s FTSE-100 fell 1.33%, while France’s CAC-40 dropped 0.7% and Germany’s DAX slipped 0.92%.

Crude oil futures fell 1.97% at $33.04 per barrel, Brent crude dropped 2.08% at $35.28. Gold futures edged climbed 0.78%.

The euro gained 0.43% at $1.125 while the pound sterling rose 0.25% at $1.2353.