The S&P 500 and Dow Jones Industrial Average ended slightly negative but well above their session lows in volatile trading on Thursday as the arrest of a Chinese technology executive fanned fears of U.S-China tensions over trade, while some beaten-up big technology and internet shares posted gains.
Following a rare midweek trading holiday, the equity markets fell at the outset of the trading, with the benchmark S&P 500 dropping as much as 2.9 percent. However, from midday stocks began paring their losses and the tech-heavy Nasdaq ended in positive territory.
The initial selling followed news that the chief financial officer of telecom equipment maker Huawei Technologies had been arrested in Canada and faced extradition to the United States.
The arrest came Street enthusiasm was fading following a truce reached over the weekend in talks between the United States and China, which had prompted some hope about resolving differences over trade that have clouded the stock market’s outlook this year.
Stocks seemed to gain further support from a report in the Wall Street Journal that Federal Reserve officials are considering whether to signal a new wait-and-see mentality after a likely interest-rate increase at their meeting in December.
Aside from trade, concerns over bond yields and interest rates have pressured the stock market in recent days. Treasury yields fell with 10-year yields hitting three-month lows, as traders scaled back expectations on the number of rate hikes the Fed would implement amid weakening economic data and market volatility.
The S&P 500 financial index which is sensitive to bond yield swings, fell 1.4 percent.
The energy sector index slumped 1.8 percent and was the worst performing group, as oil fell after OPEC and allied exporting countries ended a meeting without announcing a decision to cut crude output.
Losses for the S&P 500 were mitigated by gains for Amazon, Netflix and some of the other technology and internet stocks that have been hit particularly hard during the market’s pullback in recent months.
Approximately 10.5 billion shares changed hands on the major domestic equity exchanges, a number that was well above the 7.9 billion share daily average over the past 20 sessions.
Jobless Claims Fall Less Than Expected
The number of claims for unemployment j benefits fell less than expected last week while the four-week moving average of claims rose to its highest level since April, suggesting some loss of momentum in the labor market.
According to a report released by the Labor Department on Thursday morning, Initial claims fell by 4,000 claims to a seasonally adjusted 231,000 claims for the week ended December 1. Data for the prior week was revised to show 1,000 more applications received than previously reported.
Claims have now chalked up increases for three straight weeks, touching an eight-month high of 235,000 during the week ended Nov. 24.
While difficulties adjusting the data around holidays such as Thanksgiving Day could have raised applications, the trend in claims has softened. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 4,250 to 228,000 last week, the highest level since mid-April.
Nonetheless, claims remain at levels consistent with strong job growth. Thursday’s claims report also showed the number of people receiving benefits after an initial week of aid decreased 74,000 to 1.63 million for the week ended Nov. 24. The four-week moving average of the so-called continuing claims rose 250 to 1.67 million.
Worker Productivity Rises
Though wage growth has picked up in recent months, the unit labor costs data suggests a burst in wage inflation is unlikely. There has not been a rapid increase in wages even as the unemployment rate has dropped to near a 49-year low of 3.7 percent.
The increase in hourly compensation in the third quarter was revised down to a 3.1 percent rate from the 3.5 percent rate reported last month.
Worker productivity increased at a revised 2.3 percent annualized rate rather than the 2.2 percent estimated last month. Productivity grew at a 3.0 percent rate in the second quarter.
Trade Deficit Up Sharply
Our trade deficit jumped to a 10-year high in October as soybean exports fell further and imports of consumer goods rose to a record high, suggesting the Trump administration’s tariff-related measures to shrink the trade gap likely have been ineffective.
According to a report released by the Commerce Department on Thursday morning, the trade deficit increased 1.7 percent to $55.5 billion, the highest level since October 2008. The trade gap has now widened for five straight months. Data for September was revised to show the deficit rising to $54.6 billion instead of the previously reported $54.0 billion.
The politically sensitive deficit with China rose 7.1 percent to a record $43.1 billion in October. The United States is locked in a bitter trade war with China. Washington has imposed tariffs on $250 billion worth of Chinese imports to force concessions on a list of demands that would change the terms of trade between the two countries.
China has responded with import tariffs on U.S. goods, including soybeans. President Donald Trump has long railed against China’s trade surplus with the United States, and accuses Beijing of not playing fairly on trade.
In addition to the duties on Chinese goods, Washington has slapped tariffs on steel and aluminum imports into the United States this year. On Saturday, Trump and Chinese President Xi Jinping agreed to hold off on imposing more tariffs for 90 days while they negotiate a deal to end the trade dispute.
When adjusted for inflation, the goods trade deficit increased to $87.9 billion in October from $87.2 billion in September. The so-called real trade deficit is above the average for the third quarter.
Trade subtracted 1.91 percentage points from GDP growth in the July-September quarter. Growth estimates for the fourth quarter are around a 2.8 percent annualized rate. The economy grew at a 3.5 percent pace in the third quarter.
In October, exports of goods and services slipped 0.1 percent to $211.0 billion. Soybean exports, which have been targeted by China in the trade dispute, dropped $0.8 billion. Exports of civilian aircraft and engines also fell.
However, exports of petroleum and consumer goods were the highest on record. A strong dollar is probably restraining overall export growth.
Imports of goods and services rose 0.2 percent to $266.5 billion, an all-time high. Consumer goods imports increased by $2.0 billion to a record high of $57.4 billion, boosted by a $1.5 billion jump in imports of pharmaceutical preparations.
Motor vehicle imports were the highest on record in October, as were imports of other goods. Imports are being driven by strong domestic demand as well as the strong dollar, which is making the prices of imported goods cheaper, likely offsetting the impact of tariffs.