Dow sags ahead of Memorial Day weekend as investors watch China-U.S. tensions

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U.S. stock benchmarks traded mostly lower Friday afternoon as investors looked ahead to a three-day weekend.

Equity indexes are up for the week though despite rising Sino-American tensions and a holiday that could test the bounds of business reopening efforts after coronavirus lockdowns in much of the country.

Read:Is the stock market closed today? Here’s everything investors need to know about Memorial Day trading hours and closures

How are benchmarks trading?

The Dow Jones Industrial Average DJIA, -0.20% fell 86 points, or 0.4%, at 24,387, weighed by shares of Caterpillar Inc. CAT, -1.64% and Boeing Co BA, -1.28%. Meanwhile, the S&P 500 index SPX, +0.05% gave up 2 points, or 0.1%, at 2,946. The Nasdaq Composite COMP, +0.29% traded 0.2% higher at around 9,301, a gain of 16 points.

Meanwhile, the Russell 2000 index RUT, +0.17%, representing smaller-capitalization companies, declined 0.2%, relinquishing an earlier gain.

For the week, the Dow has climbed 3%, the S&P 500 has returned 2.9% and the Nasdaq Composite has risen 3.2%. The Russell 2000 is on pace for a 7% weekly rise.

What’s driving the market?

The main U.S. equity indexes have gained sharply for the week, with returns pegged to optimism about businesses reopening in many states—all 50 are engaged in some stage of business-restarting plans. President Donald Trump said Thursday that he wouldn’t move to shut down the U.S. economy to stem the spread of a potential second wave of COVID-19.

“We are going to put out the fires. We’re not going to close the country,” he said, speaking at a Ford Motor Co. F, +0.08% factory in Michigan.

Late Thursday, Universal Orlando executive John Sprouls asked Orange County Mayor Jerry Demings for approval to open the company’s theme parks as early as June 5, the Orlando Sentinel reported.

See: States reopen after coronavirus lockdowns

U.S. equities are increasingly pricing in a reopening of the economy and a slow but steady rebound in economic activity, Sebastien Galy, Nordea Asset Management’s senior macro strategist, wrote in a Friday research note.

“Consensus is for either a U or W shaped and we are no different from this. What we expect is that the simple realization of this consensus view will be welcomed by the market as more dire scenarios are priced out,” wrote Galy.

Equity investors are also anticipating a vaccine will be developed for COVID-19, which has infected more than 5 million people and claimed 330,000 lives world-wide, according to data compiled by Johns Hopkins University. White House infectious disease expert, Dr. Anthony Fauci, said he remains confident that a remedy for the illness can be achieved this year, speaking with NPR’s Noel King in a Friday interview.

He also said that vaccine candidates being worked on by the likes of Moderna Inc. MRNA, +2.55% looked promising.

Former Vice President Joe Biden during a Friday CNBC interview said that economic recovery from the coronavirus pandemic is a “long way away.” The presumptive Democratic presidential nominee told the business network that “the way to fix the economy is get the public health response correct.”

However, the week has also been colored by worries about U.S.-China relations, which have deteriorated in recent weeks, capping further gains for risk assets.

Given the uncertainty created by the coronavirus pandemic, China dropped its GDP target for the first time since adopting the practice in 1994, but of more concern officials suggested the government is preparing to impose a national-security law on Hong Kong in response to last year’s pro-democracy protests.

Hong Kong’s Hang Seng Index HSI, -5.56% tumbled 5.6% in response, marking its biggest loss in around five years.

The U.S. Congress was moving forward with a bill that could prevent Chinese companies from listing on U.S. exchanges. The bill would require Chinese companies to establish they are not owned or controlled by a foreign government and to submit to audits by the U.S. Public Company Accounting Oversight Board, which Chinese firms have thus far refused to do.

See: Bill that could delist Chinese companies from U.S. stock exchanges to see ‘swift passage’ in House, analyst says

U.S. markets will be closed on Monday for Memorial Day, and the bond market will close an hour early at 2 p.m. Eastern on Friday and remain closed until Tuesday.

Still, China has vowed to comply with a first phase of Sino-American trade pact forged last year.

Which stocks are in focus?
  • Under Armour Inc. UA, -3.96% UAA, -4.03% said Friday it has upsized and priced a $440 million offering of senior convertible notes that mature in 2024. Both Class A and C shares were trading lower.
  • Shares of Foot Locker Inc. FL, -10.23% sank 11.5% Friday, after the athletic shoe and accessories retailer reported a wider-than-expected fiscal first-quarter loss as revenue fell more and the gross margin rate dropped as the COVID-19 pandemic led to store closures.
  • Jefferies downgradedAurora Cannabis Inc. stock ACB, -6.32% on Friday to underperform from hold and said the recent rerating following better-than-expected earnings was neither justified nor sustainable. Shares traded 5.2% lower.
  • Shares of Navidea Biopharmaceuticals Inc. NAVB, +103.93% more than doubled Friday, after the company provided upbeat data on a continuing phase 2 trial of its treatment for rheumatoid arthritis
  • Bed Bath & Beyond Inc. BBBY, -2.20% said Friday that it plans to reopen 600 stores, including 500 across North America, and bring back about 11,000 furloughed workers by June 13.
  • Alibaba Group Holding Ltd BABA, -5.57% U.S. listed shares were down 5.7% after the company said it has seen a “steady recovery since March” after the COVID-19 outbreak dampened its business earlier in the year.
  • Shares of Deere & Co. DE, -1.51% fell 0.3% Friday, after the agriculture, turf and construction equipment maker reported fiscal second-quarter profit and revenue that fell amid business disruptions related to the COVID0-19 pandemic, but beat expectations.
  • Shares of Geron Corp. GERN, -5.61% plunged nearly 9% Friday, after the biopharmaceutical company’s large public offering of stock priced at a 34% discount.

Check out: COVID-19 case tally: 5.12 million cases, 333,323 deaths and India suffers biggest one-day case increase

How are other markets trading?

U.S. government bond yields were lower, with the 10-year Treasury note TMUBMUSD10Y, 0.660% down 2.4 basis point at 0.657%. Bond prices move inversely to yields. The bond market closes at 2 p.m. Eastern on Friday and will remain closed on Monday in observance of Memorial Day.

The U.S. dollar strengthened against a basket of its major rivals, with the ICE U.S. dollar index DXY, +0.41% trading up 0.5%.

In precious metals, gold futures for June delivery GCM20, +0.70% rose $12, or 0.7%, to settle at about $1,735.50 an ounce, but were on track for a weekly decline of more than 1%.

Crude for July delivery US:CLM20 CL.1, -1.91% was down sharply, off 79 cents, or 2.3%, to trade at around $33 a barrel.

In global equities, the Stoxx Europe 600 index SXXP, -0.02% closed less than 0.1% lower, while the FTSE 100 UKX, -0.36% ended the session down 0.4%. The FTSE 100 will be closed on Monday for a holiday.

In Asia trade, Japan’s Nikkei NIK, -0.79% rose 0.8%, Hong Kong’s Hang Seng HSI, -5.56% advanced less than 0.1%, while the Shanghai Composite Index SHCOMP, -1.88% closed down 0.5%, as did the CSI 300 Index 000300, -2.29%.