Stocks slump on new U.S.-China trade jitters

Stocks on Wall Street closed broadly lower Thursday after investors got spooked by a report that cast doubt on the prospects of a long-term U.S.-China trade deal.

Bond prices surged, sending yields down sharply, as traders turned cautious. The sell-off was a marked shift from a day earlier, when the Standard & Poor’s 500 index notched its second all-time high this week.

Despite the sell-off, the benchmark index closed out October with its second straight monthly gain as an easing of trade tensions and surprisingly good corporate earnings gave investors more confidence.

Industrial stocks led the selling Thursday after a report from Bloomberg raised concerns about the prospects of a comprehensive trade deal between the United States and China. That overshadowed remarks by President Trump, who said Thursday that both sides are working on finding a location to sign “phase one” of the trade deal.

“It’s mainly the concerns about whether there will be some kind of trade deal with China, both the first round and the bigger agreement that, obviously, appears further away,” said Kate Warne, chief investment strategist at Edward Jones. “When there’s good news on trade negotiations, stocks tend to move up, and when there’s bad news or concerns, stocks tend to sell off.”

The S&P 500 index fell 9.21 points, or 0.3%, to 3,037.56. It’s on track for its fourth straight weekly gain and is up 21.2% this year.

The Dow Jones industrial average fell 140.46 points, or 0.5%, to 27,046.23. The Nasdaq slipped 11.62 points, or 0.1%, to 8,292.36. The Russell 2000 index of smaller-company stocks fell 10.40 points, or 0.7%, to 1,562.45.

The flood of company earnings reports and a truce between the U.S. and China largely put investors’ worries about trade on the back burner this month. But a Bloomberg report Thursday helped put investors in a selling mood. The report, citing unnamed sources, suggested Chinese officials are doubtful that they will be able to reach a comprehensive, long-term trade deal with the United States.

The world’s two biggest economies have wrangled for more than 15 months over U.S. allegations that China steals technology, forces businesses to hand over trade secrets and unfairly subsidizes its tech firms in an aggressive drive to supplant American technological dominance.

They have imposed tariffs on hundreds of billions of dollars’ worth of each other’s goods in a trade fight that has slowed global economic growth.

Negotiators from both countries are trying to settle details of the first-phase deal, which sidesteps some of the biggest issues dividing the countries.

“You have the Chinese saying, gee, they’re not sure there’s a possibility for a long-term negotiation here, which is just another reminder that there are big issues still on the table,” said Paul Christopher, head of global market strategy for Wells Fargo Investment Institute. “A phase one deal is not really much of a deal at all.”

Caterpillar and 3M helped industrial-sector stocks sink Thursday. Caterpillar fell 1.8%, and 3M dropped 2%.

Financial stocks also took heavy losses as bond yields made a significant downward move. The yield on the 10-year Treasury fell to 1.69% from 1.79%.

Yields were already falling early in the day and fell further after a surprisingly weak survey on business activity in the Midwest. A separate report showed that U.S. consumer spending ticked up last month, though it fell short of economists’ expectations.

The technology sector also lost ground, despite Apple’s solid gains. The iPhone maker’s shares rose 2.3% after it issued an encouraging earnings report.

Utilities held up better than the rest of the market as investors moved money into safer-play holdings.

Communications stocks also bucked the broader market slide. Facebook gained 1.8% after releasing surprisingly good third-quarter results.

Investors have been assessing a steady flow of earnings and economic reports this week. They will get another batch of economic data Friday with the government’s release of October employment data, though a 40-day strike against General Motors is expected to dampen the jobs snapshot.

Benchmark crude oil fell 88 cents to $54.18 a barrel. Brent crude oil, the international standard, fell 38 cents to $60.23 a barrel. Wholesale gasoline fell 3 cents to $1.63 a gallon. Heating oil fell 3 cents to $1.88 a gallon. Natural gas fell 6 cents to $2.63 per 1,000 cubic feet.

Gold rose $18.20 to $1,511.40 an ounce. Silver rose 19 cents to $18.01 an ounce. Copper fell 5 cents to $2.63 a pound.