The declines followed a mixed session on Wall Street Tuesday as investors parsed the latest indications on trade relations between the two largest economies. Traders were spooked by a report that U.S. tariffs would remain in place on Chinese goods even after a preliminary deal is signed Wednesday.
The Wall Street Journal reported that the Trump administration was preparing to further tighten controls on technology exports to Huawei Technologies. The trade deal may only mark a “detente” in trade tensions, said Stephen Innes of AxiTrader.
“But I think after two years of trade war noise, hopefully, the markets have learned to take all the bluster with a grain if not a barrel of salt," Innes said. Overnight, major U.S. stock indexes shed most of their gains from earlier in the day after a report said the interim trade deal between the U.S. and China does not remove tariffs on Chinese goods.
Technology stocks accounted for much of the selling. The sector is particularly sensitive to developments in trade relations because many of the companies rely on China for sales and supply chains. Nvidia led Tuesday’s slide, dropping 1.9%. Health care stocks led the gainers, receiving a big boost from Perrigo, which vaulted 12.6%. Boston Scientific fell 6.2% after giving Wall Street a weak fourth-quarter sales update.
“Would the market be more satisfied with a reduction in those tariffs? Absolutely,” said Quincy Krosby, chief market strategist at Prudential Financial. “Nonetheless, you don't want to have an escalation in the tariff war. That was the most important thing for the market.”
The S&P 500 index fell 0.2% to 3,283.15 after gaining as much as 0.2% earlier. The Nasdaq slid 0.2% to 9,251.33. The Dow rose 0.1% to 28,939.67, while the Russell 2000 index of smaller company stocks climbed 0.4%, to 1,675.74.
Bond prices rose. The yield on the 10-year Treasury slipped to 1.81% from 1.84% late Monday. President Donald Trump and China's chief negotiator, Liu He, are scheduled to sign a modest trade pact Wednesday that calls for the U.S. to ease some sanctions on China. The U.S. dropped its designation of China as a currency manipulator ahead of the signing.
Beijing, meanwhile, will step up its purchases of U.S. farm products and other goods. While the deal is limited in its scope, investors hope it will prevent further escalation in the conflict that has slowed global growth, hurt American manufacturers and weighed on the Chinese economy.
With the trade issue entering a new stage, Wall Street is focusing on the rollout of corporate earnings reports over the next few weeks. Several large banks were among the companies that kicked off the latest earnings season on Wall Street Tuesday.
JPMorgan Chase rose 1.2% after the banking giant reported a surge in profits because of a blowout quarter from its trading desks. The earnings handily beat analysts’ forecasts. Citigroup climbed 1.6% after reporting a similar jump in profits because of its trading operations.
Wells Fargo did not fare as well. The bank's stock slumped 5.4% as its profit and revenue dropped because of hefty costs and lower interest rates. Wells Fargo is still under growth restrictions by regulators after years of missteps, beginning in 2016 with the uncovering of millions of fake checking accounts its employees opened to meet sales quotas.
Delta Air Lines rose 3.3% after the company increased its fourth-quarter profit to $1.1 billion by adding more flights over the holiday period and packing them even more full of passengers. The results beat Wall Street’s forecasts.
Delta's solid report helped lift some of its rivals. United Airlines rose 1.1% and American Airlines gained 0.5%. Wall Street expects corporate profits for S&P 500 companies in the last three months of 2019 to be down by 2%. That would be the first time that earnings for the S&P 500 would have declined four quarters in a row since the period ending in mid-2016, according to FactSet.
Benchmark crude oil lost 11 cents to $58.12 a barrel in electronic trading on the New York Mercantile Exchange. It gained 15 cents on Tuesday, to $58.23 per barrel. Brent crude oil, the international standard, gave up 11 cents to $64.38 per barrel. It gained 29 cents on Tuesday to $64.49 a barrel.
Gold rebounded, gaining $7.10 to $1,551.70 per ounce. The dollar slipped to 109.94 Japanese yen from 109.97 yen on Tuesday. The euro was flat at $1.1128.
AP Business writers Alex Veiga and Damian J. Troise contributed.