Wall Street has been cheering the latest push by the world's two largest economies to sign an agreement before tariffs on a wide range of consumer products go into effect on Dec. 15. On Thursday, China said both sides in the trade war had agreed to roll back tariffs on each other if talks progress.
But President Donald Trump injected more uncertainty into the trade issue on Friday when he dismissed the assertion. "I haven't agreed to anything," Trump told reporters at the White House. Treasury yields gave ground immediately after Trump made his comments, a sign of increased nervousness in the market. Stock prices also dipped briefly but later erased the losses.
Energy stocks were among the day's biggest decliners. Exxon Mobil fell 2%. Health care stocks were the biggest gainers. Vertex Pharmaceuticals rose 2.8%. Walt Disney was a standout among communications companies with solid gains following better-than-expected earnings.
Several other companies rose following solid earnings reports. Energy drink maker Monster Beverage rose 3.2% and Bookings Holdings gained 2.3%. The yield on the 10-year Treasury remained stable at 1.92%, but it had been as high as 1.95% in the morning.
KEEPING SCORE: The S&P 500 index was virtually flat, as of 2 p.m. Eastern time. The Dow Jones Industrial Average fell 45 points, or 0.2%, to 27,629. The Nasdaq rose 0.1%. The Russell 2000 index of smaller company stocks rose 0.1%. European and Asian markets fell.
ANALYST'S TAKE: Investors have been pushing indexes to records this week because solid corporate earnings and signs of progress in trade disputes lessened some economic risks. "The general tone of the market will continue to be very cautiously optimistic," said JJ Kinahan, chief market strategist at TD Ameritrade.
The market has mostly stabilized on Friday, he said, as investors look for more signs that risk will continue receding. Kinahan said rising bond yields, particularly the 10-year Treasury's rise above 1.9%, is a good sign and the next big milestone may be yields rising above 2%.
CONFIDENCE GAP: Not only are yields rising, the gap between short- and long-term Treasurys is widening. That's seen as a vote of confidence in the economy by the bond market, and it means a closely followed warning bell about recession has gone silent.
The 10-year Treasury yield dropped below the two-year yield in late August and early September. It's a relatively rare thing because investors generally demand higher interest rates to lock up their money for longer periods of time, and it's something that economists call an "inverted yield curve."
Such inversions have correctly predicted recessions in the past, though they've given some false positives. Since the summer, though, increased optimism in the economy and the odds of a U.S.-China trade deal have flipped the yield curve back to normal. The gap between the two- and 10-year Treasurys is back at its healthiest level since July.
ROARING MOUSE: Walt Disney rose 3.3% after handily beating Wall Street's fiscal fourth-quarter profit forecasts on surging revenue because of films including "The Lion King" and "Toy Story 4". The company also said it received a positive response from a test of its planned streaming service, Disney Plus.
WIDENING GAP: The retailer fell 6.9% after slashing its profit forecast for the year and announcing the resignation of CEO Art Peck. The company has been struggling to turn around a long-standing sales slump and is splitting into two publicly traded companies, one for its Old Navy brand and another for the Gap, Banana Republic and its lesser known brands like Athleta, Intermix and Hill City.
AP Business Writer Stan Choe contributed.