U.S. stock indexes hovered around the break-even line on Friday after recovering early losses, managing to close slightly higher.
Futures were deeply negative before the opening bell in response to a report that the U.S. is blocking microchip shipments to Huawei, as well as news that U.S. April retail sales declined even more than expected. But less than an hour after trading began, the Dow Jones Industrial Average had turned positive. It spent the rest of the day close to even.
By the close, the Dow finished up 60 points, or 0.3%, while the S&P 500 added 0.4% and the Nasdaq Composite rose 0.8%.
Most of the day’s volatility occurred during the pre-market session. European stocks and U.S. futures had initially climbed after investors were encouraged by signs of a recovery in China after a late rally on Wall Street on Thursday. Chinese factory output surged a better-than-expected 3.9% in April as the country’s industrial sector returned to work following weeks of shutdown.
The upbeat mood rapidly shifted, though, as Reuters reported that the U.S. Commerce Department was taking steps to block shipments of semiconductors to Huawei. Stock futures turned red and stocks opened down.
The department is amending a rule to “strategically target Huawei’s acquisition of semiconductors that are the direct product of certain U.S. software and technology,” the news service said. The news added to fear of renewed U.S.-China tensions; earlier this week, President Donald Trump threatened to “cut off” the relationship with Beijing.
China, according to other reports, might respond by activating its “unreliable entities list.”
Shares of Qualcomm (ticker: QCOM) closed down 5.1% while Apple (AAPL) and Cisco Systems (CSCO) shares fell 0.6% and rose 1%, respectively, after the editor of China’s Global Times wrote that the country may retaliate if the U.S. halts microchip shipments to Huawei. China’s Shanghai Composite and Hong Kong’s Hang Seng indexes each slipped 0.1% on Friday.
In a second downbeat development, U.S. government figures showed that retail sales fell 16.4% in April, compared with the 11.4% drop economists expected. Last month may very well end up being the trough for retail sales, with stores in several states beginning to reopen in May.
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The pan-European Stoxx 600 index rose 0.5% on Friday, while the German DAX ended the day 1.2% higher. The French CAC 40 gained 0.1% and the U.K.’s FTSE 100 added 1%.
BT was one of Europe’s sharpest risers Friday, climbing 5.4% on reports the telecom giant is in talks to sell a £20 billion stake in Openreach—the division that runs the U.K.’s broadband network. The company’s shares tumbled last week after it suspended dividends until 2022 to free up cash to invest in infrastructure.
Travel stocks rebounded sharply after heavy losses earlier this week. Cruise operator Carnival (CCL) climbed 4.2%, budget airline EasyJet (EZJ.UK) rose 3.2%, and hotel chain Intercontinental Hotels Group (IHG) added 1.1%.
J.C. Penney (JCP) shares soared 21.2% after plunging earlier on reports that the struggling department store chain will file for bankruptcy as soon as Friday. It was reported earlier this week that J.C. Penney was speaking with lenders about securing $450 million in financing for an expected bankruptcy filing.
Aurora Cannabis (ACB) shares popped 68.7% after the cannabis grower said it expects to be cash flow positive in the September quarter after March-quarter sales exceeded analysts’ expectations.
Applied Materials (AMAT) stock fell 4.4% after its profits fell short of expectations when it reported earnings on Thursday evening. The semiconductor equipment company gave no forecast for its performance this quarter.
Write to Nicholas Jasinski at nicholas.jasinski@barrons.com and Carleton English at carleton.english@dowjones.com
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
