Stock market today: Shares fall despite jobs numbers, U.S.-China trade deal talk

Last Updated Nov 2, 2018 4:20 PM EDT

Despite great news on jobs in October and talk of a possible U.S.-China trade deal in the works, U.S. stocks fell Friday as a big loss from Apple dragged technology companies lower and an increase in interest rates hurt high-dividend companies. 

The iPhone maker, the world's largest technology company, forecast weak revenue growth Thursday evening and said it will stop disclosing quarterly phone sales. Apple shares fell 6.6 percent.

Stocks had surged over the previous three days and were still on pace for a big weekly gain after skidding in October to their worst monthly loss in seven years. But positive news Friday seemed to have little no impact on traders. The federal government said employers added 250,000 jobs in October, far more than analysts expected, and hourly pay jumped 3.1 percent, the most since the beginning of 2009.

In addition, President Donald Trump said Thursday he spoke with China's Xi Jinping and that trade discussions are "moving along nicely," boosting Wall Street's hopes for a resolution to a deepening dispute that threatens tariffs and other penalties on hundreds of billions of dollars worth of business activity between the two economic powers. 

The Dow fell 110 points, or 0.4 percent, to close at 25,271. The S&P 500 ended the day down 0.6 percent and the Nasdaq, which has a high concentration of technology companies, lost 1 percent. The Russell 2000 index of smaller-company stocks added 0.2 percent.

The S&P 500 rose roughly 2 percent this week after strong gains the last three days, but would have to rally another 7.9 percent to match the all-time high it reached on Sept. 20.

A hopeful start 

Many investors had started the day hopeful, with overseas stocks up sharply following Mr. Trump's announcement that he has asked U.S. officials to start drafting potential terms for a new trade agreement with China, with the president aiming to reach a new pact while at the Group of 20 nations summit in Argentina later in November, reported Bloomberg News. 

Trade tensions have weighed on investor sentiment because the Trump administration's tariffs on Chinese imports sparked more than 100 publicly traded U.S. companies to disclose how much the import duties could hurt them, said Liz Ann Sonders, chief investment strategist for Charles Schwab.

"Companies are saying 'this is biting and here's how,'" she said. "They're starting to talk about profit margins and whether they're going to pass the expenses onto consumers."

Mr. Trump didn't give details about his discussions with Xi, but there have been few signs of movement in the trade dispute in recent months, and investors are getting nervous about the prospect of huge tariff increases, with U.S. markets down almost 10 percent since their highs in August.

A Chinese foreign ministry spokesman told reporters the discussion was positive and that the two leaders were optimistic about resolving the dispute over trade practices and technology development that has resulted in both sides imposing penalty tariffs on  each other's exports. Meanwhile, Chinese state media said Xi has promised tax cuts and other help to China's entrepreneurs in a renewed effort to revive the cooling, state-dominated Chinese economy.

Not so fast: Continuing turmoil?

Yet until there's clarity on a trade deal, investors may continue to fret, noted CityIndex analyst Fiona Cincotta. 

"A formal meeting between Trump and his Chinese counterpart will take place later this month at the G-20 summit and is likely to inject volatility into trading until the two sides reach a formal resolution over trade issues," she wrote in a research note. 

October brought a sudden, screeching halt to a milestone-setting September and snapped a six-month winning streak for the benchmark S&P 500 index. Last month clocked in as the worst month for the market since September 2011.

Investors may be on their toes until the trade dispute is resolved. Mr. Trump "has been known to blow hot and cold before and during major negotiations and a positive comment today could easily turn into a less than flattering one tomorrow," Cincotta noted. 

Other analysts were outright skeptical of the prospects for a China trade deal. "President Trump's reported request for his cabinet to draw up the outline of a 'deal' with China is likely an attempt to support a market rally heading into the midterm elections on November 6 rather than a sign of an imminent breakthrough," Height Capital's Clayton Allen argued in a note Friday.

Jobs, jobs, jobs

The Department of Labor said U.S. employers continued to add jobs at a fast clip in October, with no sign that hiring is slowing down. The proportion of Americans with jobs is at its highest level since January 2009, and the monthly increase in pay was also the largest since then. Along with high consumer confidence, those are all good signs for economic growth and consumer spending in the months to come.

Bond prices dropped, sending yields sharply higher. The yield on the 10-year Treasury note jumped to 3.22 percent, from 3.14 percent. A jump in interest rates last month started the market's downturn, but investors on Friday didn't seem as worried about the increase. "It clearly was a good report," said David Lefkowitz, senior equity strategist Americas at UBS Global Wealth Management.

The wage number, while high, was about what investors were expecting, Lefkowitz said. That's important because investors are still sensitive to signs that inflation could flare up, forcing the Federal Reserve to be more aggressive in raising rates. If inflation grows moderately, as it appeared to in October, that's not as likely.

Apple cored

Apple's sales in its latest quarter and its estimates for the holiday season both disappointed experts. The tech giant also surprised investors by saying it will no longer disclose the number of iPhones it sells each quarter. Apple was unique among big smartphone makers in saying how many phones it sold and what the average price was. Apple gets most of its revenue from iPhone sales and lately it's boosted its profits by selling higher-priced models.

The unexpected change raised suspicions that Apple might be trying to mask a downturn in the phone's popularity. The company says the quarterly numbers and prices didn't necessarily tell investors how strong its business has been.