NEW YORK: Wall Street turned negative in indecisive trade on Thursday, giving up earlier gains as investors grappled with renewed trade worries and rising oil prices.
Comments by U.S. President Donald Trump that China "has become very spoiled on trade" added fuel to investor jitters as a second round of talks was launched today in efforts to avoid a tariff war between the world's two largest economies.
Unrest in the Middle East suggested a reduction of oil supply and sent crude prices to their highest level in three-and-a-half years. The S&P Energy index was up 1.2 percent, the largest gainer of the major S&P 500 sectors.
U.S. small-cap stocks fared better than their larger rivals as the Russell 2000 hit a record for the second session in a row, while bigger firms with more international exposure were pressured by rising oil prices and a strengthening dollar.
"It doesn't surprise us at all," said Marshall Gause, CEO and chief investment officer at Geneva Fund Partners in Denver. "If you're looking for growth, small- to mid-caps may be the place to go if you can stomach the volatility."
Trade and oil price concerns have also benefited smaller firms, according to Gause. "I think that they're in a better place," he said. "Global companies are more susceptible to that. Plus they're more susceptible to increased energy prices, typically."
Economic reports showed U.S. unemployment rolls falling to their lowest level since 1973 and mid-Atlantic manufacturers asking higher prices for their products, suggesting tightening labor market conditions and firming inflation, which support the likelihood of a Federal Reserve rate hike next month.
U.S. 10-year Treasury yields rose to a near seven-year high at 3.1220 percent, pressuring rate-sensitive sectors as investors ponder whether bonds offer an attractive alternative to riskier equities.
At 2:34 p.m. ET, the Dow Jones Industrial Average fell 62.71 points, or 0.25 percent, to 24,706.22, the S&P 500 lost 2.89 points, or 0.11 percent, to 2,719.57 and the Nasdaq Composite dropped 18.80 points, or 0.25 percent, to 7,379.50.
So-called defensive stocks were among the worst percentage losers among the 11 major sectors of the S&P 500. Rate-sensitive telecom , real estate and utility shares were down in the face of increasing U.S. government bond yields.
Cisco Systems was the biggest drag on the S&P 500 and the Nasdaq, slipping 3.5 percent despite beating profit and revenue estimates in its post-market earnings report. In a research note, Citigroup said investor perception is that the technology company is losing market share.
The S&P 500 Technology sector was down 0.6 percent.
Walmart shares were down 2.3 percent. Walmart said profit margins remained under pressure due to price cuts and higher freight costs, weighing on its shares even as sales and earnings came in stronger than expected.. The retailer's stock was the biggest weight on the Dow.
Advancing issues outnumbered declining ones on the NYSE by a 1.12-to-1 ratio; on Nasdaq, a 1.47-to-1 ratio favored advancers.
The S&P 500 posted 25 new 52-week highs and 4 new lows; the Nasdaq Composite recorded 132 new highs and 26 new lows.
(Reporting by Stephen Culp; Editing by Nick Zieminski)