US Stocks End Week Lower as Investors Look Ahead to China Talks

(Bloomberg) — US stocks closed little changed Friday to notch a small weekly loss as traders weighed comments from President Donald Trump suggesting that an 80% tariff on China seemed right, just as negotiations between the two countries are set to begin on Saturday.

The S&P 500 Index fell 0.1%, while the Nasdaq 100 Index was flat and the Dow Jones Industrial Average dropped 0.3%. The Russell 2000 Index slipped 0.2%. The S&P 500 fell 0.5% for the week, pausing after two straight weeks of gains. 

Among individual stocks, shares of Expedia Group Inc. sank 7.3% after the company cut its full-year outlook for gross bookings and revenue, citing weaker-than-expected domestic and inbound travel demand in the US early in the year. Chip stocks rose after Taiwan Semiconductor Manufacturing Co.’s revenue jumped 48% in April, as electronics firms rushed to secure essential components before global tariffs took effect. Lyft Inc. jumped 28% after reporting better-than-expected gross bookings in the first quarter — a sharp contrast with the disappointing results from larger ride-hailing rival Uber Technologies Inc.

Investors remained focused on the stream of trade-related developments. Trump, in a social-media post Friday morning, said “80% Tariff on China seems right! Up to Scott B,” referring to Treasury Secretary Scott Bessent. China’s Commerce Minister Wang Wentao during a meeting with Russia’s Economy Minister Maxim Reshetnikov in Moscow said the country’s decision to hold trade talks with US is based on “thorough evaluation.”

“We continue to think much of this rally has been in anticipation of some de-escalation out of China, and as such when the actual news comes out the market reaction is likely to be lackluster and could even mark a tactical top, regardless of what the news is,” said Jonathan Krinsky, chief market technician at BTIG. “This creates a very poor near-term risk/reward.”

Meanwhile, European leaders presented a united front, with German Chancellor Friedrich Merz saying individual member states won’t strike side deals and European Commission President Ursula von der Leyen indicating that a concrete proposal is needed for any serious talks with Washington.

Separately, Trump’s team has set a list of roughly 20 partners as the focus of early negotiations, people familiar with the matter said. The group includes nations such as Japan, South Korea and Vietnam, all top sources of US imports where Trump wants to shrink the trade deficit. 

Some market strategists are continuing to urge caution. On Friday, Bank of America Corp.’s Michael Hartnett warned that the stunning rebound in US stocks is likely over. While equities had “correctly” rallied on optimism around lower tariffs in the second quarter, the strategist said, he does not see further gains as investors “buy the expectation, sell the fact.”

In fact, an analysis from Bloomberg Intelligence found that a stock-market indicator has entered a phase historically associated with the worst return prospects for the S&P 500. BI’s Equity Market Regime Model, which tracks the benchmark stock gauge — fell into a cautious zone in March and April, according to data compiled by Gina Martin Adams and Gillian Wolff. 

Citigroup’s head of US equity strategy Scott Chronert voiced a concern about valuations, saying that while pessimism about the trade war is fading, the initial framework with the UK implies that falling below a 10% baseline tariff may be difficult.

The strategist said that full-year earnings estimates for the S&P 500 need “further rightsizing.” 

Investors also paid attention to a host of Fed speakers on Friday, including John Williams, Austan Dean Goolsbee and Christopher Waller. Waller signaled that firing Fed officials would be bad for the US economy, and Williams said that keeping inflation expectations anchored near policymakers’ target forms the “bedrock” of central banking.

Outside of the US, unemployment rate in Canada for April soared back to a level last seen in November, the highest since January 2017 outside of the pandemic.

In geopolitics, the tensions between India and Pakistan continue, with India saying it “neutralized” Pakistani drone and missile attacks targeting several military sites on Thursday night. Senior European officials are in talks with the Trump administration to finalize an agreement on a 30-day ceasefire in Ukraine that would impose new sanctions on Russia if President Vladimir Putin doesn’t budge, according to people familiar with the matter.

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