U.S. stocks fell Wednesday, with the S& P 500 index and the Nasdaq index closing slightly above key support levels amid fears that a prolonged trade war between the United States and China would curb global economic growth and prompt investors to switch to bond hedge.
There is little sign of easing trade tensions between the world's two largest economies. Chinese newspapers warned that Beijing might use rare earth elements to fight back against the United States after US President Trump said Monday that he was "not ready" to reach a trade agreement with China. Rare earths include 17 chemical elements and are widely used in many products, ranging from high-tech consumer electronics products to military equipment.
Huawei, China, filed a lawsuit against the U.S. government late Tuesday, heightening investor concerns as the latest initiative to fight Washington sanctions.
"The factors affecting the market today are trade and trade. The problem now is that this is what I call "potentially unquantifiable results," so nobody really knows what will happen, "says Sam Stovall, chief investment strategist at CFRA Research in New York.
"What we know is that the war of words about trade is getting fiercer and fiercer. If we don't act carefully, we will eventually fall into a trade war, which will surely slow down economic growth and possibly push us into recession," he added.
Major U.S. stock indices all recorded a fourth day decline in five trading days. The S& P 500 index fell 5.5% from its closing high on April 30. However, both the S&P 500 index and the Nasdaq index closed above the 200-day moving average.
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