FILE - In this Sept. 18, 2019, file photo Stock trader Gregory Rowe works at the New York Stock Exchange. The U.S. stock market opens at 9:30 a.m. EDT on Friday, Sept. 27. (AP Photo/Mark Lennihan, File)

US stocks fall; S&P 500 heads for 2nd straight weekly loss

September 27, 2019 - 3:41 pm

Technology companies led a broad slide in stocks on Wall Street Friday afternoon as investors worry about the potential for another escalation in the trade war between the U.S. and China.

The selling, which reversed an early gain, followed a report by Bloomberg saying that the Trump administration is considering ways to limit U.S. investments in China. The report cited unnamed persons familiar with the administration's internal discussions.

The prospect of another ramp-up in the trade conflict dampened investors' already cautious optimism that the world's two biggest economies might make progress as their representatives resume negotiations next month.

Uncertainty over the costly and long-running trade war has fueled volatility in the market and stoked worries that the impact of tariffs and other tactics employed by the countries against each other is hampering U.S. economic and corporate profit growth.

Meanwhile, the Commerce Department said Friday that spending by U.S. consumers rose just 0.1% in August, the smallest gain in six months, even as incomes increased at a solid pace. Consumers are a key driver of the economy as businesses have cut their investment spending and exports have slipped. On Thursday, the government said the U.S. economy grew at a modest 2% annual rate in the second quarter, a sharply slower pace than earlier the year.

Technology stocks, which are particularly sensitive to swings in the trade conflict, accounted for much of the selling. Microsoft slid 1.6% and Adobe dropped 2.7%. Micron Technology led the sector's slide after the chipmaker issued a weak profit forecast and a sales warning, citing the trade war.

Communications stocks also took heavy losses. Twitter lost 3.4% and Activision Blizzard fell 3.6%.

The S&P 500 index was on track for its second straight weekly loss. Volatility from the ongoing U.S.-China trade conflict and soft economic data have been weighing on the market throughout the week.

Meanwhile, investors are preparing for the close of the third quarter and an upcoming round of corporate earnings reports.

KEEPING SCORE: The S&P 500 index was down 0.8% as of 3:24 p.m. Eastern time. The Dow Jones Industrial Average slid 119 points, or 0.5%, to 26,771. The Nasdaq, which is heavily weighted with technology stocks, dropped 1.4%. The Russell 2000 index of smaller companies was off 1.1%.

Major stock indexes in Europe finished broadly higher.

TRADE WAR: Negotiators are due to meet next month in Washington for a 13th round of talks aimed at ending the dispute over trade and technology that threatens to tip the global economy into recession.

Both sides have taken conciliatory steps this month ahead of the trade talks, moves that fueled optimism among investors. Chinese importers have set deals to buy American soybeans and pork. And the Trump administration postponed a planned Oct. 1 tariff hike on Chinese imports to Oct. 15.

The market has been very sensitive to the ups and downs in the trade dispute. Stocks rose Wednesday after President Donald Trump told reporters that China wants "to make a deal very badly," adding that "it could happen sooner than you think."

That optimism faded from the markets Friday as investors weighed the implications of the U.S. weighing more tough measures only a couple of weeks away from new trade talks.

"Here we are, just two weeks out, and now we're doing things to sort of ruffle feathers again," said Randy Frederick, vice president of trading & derivatives at Charles Schwab.

ROUGH WEEK: The market has been in a slump all week as investors pull back amid trade war worries, reports of sluggish economic growth and an impeachment inquiry into President Donald Trump.

The tech-heavy Nasdaq bore the brunt of the selling and is on track for a 2.5% loss this week, while the S&P 500 is headed for a 1.3% decline. It will mark second straight weekly loss for both major indexes.

Smaller company stocks had a particularly rough week. The Russell 2000 index is headed for a 2.8% loss.

For some stocks, this week has been their worst of the year. Facebook is off 7.4% for the week after media reports suggesting the Department of Justice is considering opening an antitrust investigation into the social media company.

CHIP DIP: Micron Technology sank 10.6% after the chipmaker gave investors a weak profit forecast for the fiscal first quarter and warned that the trade war could hurt sales. The company gets more than half its revenue from China. Huawei, a prime target for U.S. sales restrictions, is a key customer.

MUSICAL CEOS: Wells Fargo rose 3.8% after it named its third CEO in as many years as the bank attempts to put a series of scandals behind it. Charles Scharf, currently CEO of Bank of New York Mellon, will take over from C. Allen Parker.

The company has been involved in a series of scandals since 2016 with the uncovering of millions of fake checking accounts its employees opened to meet sales quotas.

LIFTOFF: LATAM Airlines surged 29.9% after Delta Air Lines invested $1.9 billion in the airline, which focuses on Latin American routes. The investment gives Delta a 20% stake in the company.

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AP Business Writer Damian J. Troise contributed.

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