Stocks turn negative, Dow erases 152-point gain as Street ends wild August

Stocks fell on Friday, erasing earlier gains, as Wall Street concluded a volatile month.

The Dow Jones Industrial Average traded 12 points lower, or 0.04%. The S&P 500 dipped 0.15% while the Nasdaq Composite traded 0.5% lower. The 30-stock Dow rallied more than 150 points earlier in the day amid optimism around U.S.-China trade relations.

China’s Foreign Ministry said on Friday that U.S. and Chinese negotiators are maintaining “effective communication ” as the two countries try to strike a trade deal, Reuters reported. The report follows comments from the Chinese Ministry of Commerce on Thursday that hinted China will not escalate for now the trade war with the U.S. President Donald Trump also said that some trade discussions had taken place on Thursday, with more scheduled over the coming weeks.

The U.S. and China have been engaged in a trade war since last year, with both countries slapping tariffs on billions of dollars worth of their products. This has led to worries over corporate profit growth and fears of a broader economic slowdown.

“For U.S.-China trade to cause a sustainable rally, we need some proof of actual movement towards a trade ‘truce,’” said Tom Essaye, founder of The Sevens Report, in a note. “While rhetoric has improved, that did not happen.”

The back and forth between China and the U.S. on the trade front has led to a volatile month on Wall Street. Entering Friday’s session — the last one for August — the Dow and S&P 500 were both down nearly 2% while the Nasdaq Composite had lost around 2.5%.

The Cboe Volatility Index (VIX), widely considered to be the best fear gauge on Wall Street, traded as high as 24.81 in August before pulling back to around 17. Investors also loaded up on traditionally safer assets such as gold and silver this month. The SPDR Gold Trust (GLD) is up more than 8% in August while the iShares Silver Trust (SLV) has surged 12.2%.

At the same time, economic data has also pointed to a global growth slowdown, ramping up concerns of a possible recession.

The 10-year Treasury note yield fell below the 2-year rate this month. This is known as a yield-curve inversion and experts fear it because it has historically preceded recessionary periods in the U.S.

Still, recent U.S. economic data has been strong. U.S. consumer spending rose 0.6% in July, the Commerce Department said Friday, topping a Reuters estimate of 0.5%. Meanwhile, consumer confidence remains near its highest level in nearly 20 years.

CNBC

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Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya