US close: Stocks drop again on trade tensions and after mixed jobs report

US stocks gave back more ground on Friday as Donald Trump's unexpected threat of more tariffs on Chinese imports and a mixed monthly data on non non-farm payrolls weighed on sentiment.

By the end of trading, the Dow Jones Industrial Average was down 0.35% at 26,485.01, while the S&P 500 was 0.73% weaker to 2,932.05 and the Nasdaq Composite finished the session down by 1.32% lower at 8,004.07.

In parallel, the yield on the benchmark 10-year US Treasury note gave back five basis points to 1.85% and that on the two-year note declined by two points to 1.71%.

As of Friday's close, Fed funds futures were almost fully pricing-in two more 25 basis point interest rate reductions by the time of the December Federal Open Market Committee meeting.

Wall Street extended the previous day's slump after Donald Trump threatened on Thursday evening to slap an additional 10% tariff on $300bn-worth of Chinese goods being imported into the US from 1 September.

The president broke a truce in the long-running trade war between the world's two largest economies with the move, which came just a day after US and Chinese officials wrapped up a shorter than expected round of trade talks in Shanghai, with Trump accusing Beijing of not having met pledges to boost agricultural exports and to crackdown on shipments of Fentanyl.

The Chinese foreign ministry swung back at the White House on Friday morning, saying the US needed to lose its illusions, take some responsibility and get back on track to wrap up the trade war.

According to Reuters, China's spokesperson at the foreign ministry, Hua Chunying, said Beijing would be forced to take countermeasures if the US went ahead with the tariffs.

Trump later said that he was open to shelving the new tariffs if there were signs of progress in the trade talks.

On the data front, activity in the US jobs market slowed last month and the length of the average workweek declined a bit, although wages grew more quickly than expected and the labour force participation rate ticked higher.

According to the Department of Labor, non-farm payrolls expanded by 164,000 in July, following on from an increase of 193,000 in the month before and narrowly ahead of the 160,000 gain economists had been anticipating.

However, payroll increases for the prior two months were revised down by a combined 41,000.

The unemployment rate meanwhile held steady at 3.7%, as expected, even as the labour force participation rate rose from 62.9% for June to 63.0% in July or by 370,000 to 163.351m.

The year-on-year rate of increase in average hourly earnings meanwhile rose from 3.1% in June to 3.2% for July, but the length of the average workweek shrank from 34.4 hours in June to 34.3 for July.

Commenting on the data, Ian Shepherdson, chief economist at Pantheon Macroeconomics, highlighted the unexpectedly strong 0.3% month-on-month increase in average hourly earnings, which were it not for various calendar issues might have printed at up by 0.4% or 0.5%.

Nonetheless, the three-month moving average for payrolls growth fell to a "barely respectable" 140,000, Shepherdson said.

"Leading indicators point to gains averaging about 175K in August and September, but all bets are then off if the administration follows through its threat to impose 10% tariffs on the $300B or so of Chinese imports currently not tariffed," he said.

"The economy does not need lower rates if the threatened tariffs ultimately are not imposed, but if they happen, just in time to crimp hiring ahead of the holidays in the expectation that higher prices will hit spending, then the Fed likely will act."

Economists at Barclays Research appeared more sanguine, describing service sector employment to clients as "resilient" and saying that factory sector employment was "holding up surprisingly well".

Looking at trade, America's shortfall on trade with the rest of the world widened in June, on the back of a big drop in goods exports.

According to the Department of Commerce, the trade deficit in goods and services increased from -$54.5bn for May to -$55.2bn in June.

In month-on-month terms, exports weakened by 2.1% to reach $206.3bn, hit by lower sales of gem diamonds, pharmaceutical preparations and computer accessories. Imports fell 1.7% on the month to reach $261.5bn.

Elsewhere, new orders for US-made goods rose less than expected last month, while unfilled orders continued to shrink, indicating a persistent weakness in the manufacturing sector.

Factory goods orders increased 0.6%, helped along by demand for machinery and transportation equipment, according to the Commerce Department. Data for May was revised down to show factory orders falling 1.3% instead of the 0.7% previously reported.

Lastly, US consumer sentiment remained flat throughout late July, as optimism around personal finances helped to offset uncertainties surrounding the US and China's trade spat.

The University of Michigan consumers sentiment index came to 98.4, unchanged from earlier on in July and up a touch from June's final reading of 98.2. Analysts had forecast a final July reading of 98.5.

In terms of corporate news, Chevron recovered early losses on the back of falling crude oil prices after reporting that profits rose by more than a quarter during the second quarter thanks to increased output, while ExxonMobil was down 0.98% as news of a fire that has left 37 injured at one of the company's plants in Harris County, Texas offset its earnings beat.

Dow Jones - Risers

Boeing Co. (BA) $339.56 1.58%
McDonald's Corp. (MCD) $214.48 1.53%
Merck & Co. Inc. (MRK) $84.47 0.93%
Travelers Company Inc. (TRV) $146.94 0.77%
Johnson & Johnson (JNJ) $131.07 0.65%
Verizon Communications Inc. (VZ) $55.59 0.62%
Unitedhealth Group Inc. (UNH) $250.05 0.35%
American Express Co. (AXP) $124.31 0.18%
Dowdupont Inc. (DWDP) $30.52 0.00%
Chevron Corp. (CVX) $120.73 -0.01%

Dow Jones - Fallers

Cisco Systems Inc. (CSCO) $53.25 -3.86%
JP Morgan Chase & Co. (JPM) $112.93 -2.65%
Nike Inc. (NKE) $81.14 -2.37%
Pfizer Inc. (PFE) $38.00 -2.16%
Apple Inc. (AAPL) $204.02 -2.12%
International Business Machines Corp. (IBM) $147.25 -2.04%
Caterpillar Inc. (CAT) $124.54 -1.77%
Intel Corp. (INTC) $48.68 -1.66%
3M Co. (MMM) $170.55 -1.64%
Procter & Gamble Co. (PG) $116.44 -1.36%

S&P 500 - Risers

Kellogg Co. (K) $63.40 8.90%
Fortinet Inc. (FTNT) $86.05 8.90%
Sealed Air Corp. (SEE) $44.33 7.70%
Iron Mountain Inc (New) (IRM) $31.44 6.90%
Noble Energy Inc. (NBL) $21.85 6.68%
Teleflex Inc. (TFX) $361.35 6.36%
Kroger Co. (KR) $22.24 5.10%
Western Union Co. (WU) $21.82 3.41%
Eli Lilly and Company (LLY) $112.42 3.18%
Mid Amer Apt Commun (MAA) $121.60 3.18%

S&P 500 - Fallers

Fluor Corp. (FLR) $22.64 -26.66%
NetApp Inc. (NTAP) $46.04 -20.22%
Prudential Fincl Inc. (PRU) $88.56 -12.59%
Quanta Services Inc. (PWR) $33.51 -10.45%
Arista Networks Inc. (ANET) $244.12 -10.32%
Lincoln National Corp. (LNC) $58.66 -10.22%
PVH Corp. (PVH) $80.50 -9.47%
LyondellBasell Industries (LYB) $76.14 -9.02%
Pioneer Natural Resources Co. (PXD) $127.27 -7.80%
Invesco Ltd. (IVZ) $17.84 -7.03%

Nasdaq 100 - Risers

Qurate Retail Inc. (QRTEA) $13.75 1.70%
Sirius XM Holdings Inc (SIRI) $6.34 1.12%
Micron Technology Inc. (MU) $44.08 1.10%
Celgene Corp. (CELG) $93.87 0.88%
Check Point Software Technologies Ltd. (CHKP) $111.74 0.86%
Amgen Inc. (AMGN) $187.22 0.66%
Liberty Global plc Series C (LBTYK) $25.95 0.46%
J.B. Hunt Transport Services Inc. (JBHT) $101.67 0.44%
Liberty Global plc Series A (LBTYA) $26.49 0.34%
Mondelez International Inc. (MDLZ) $53.76 0.24%

Nasdaq 100 - Fallers

Cognizant Technology Solutions Corp. (CTSH) $63.49 -4.40%
Skyworks Solutions Inc. (SWKS) $79.33 -4.16%
Workday, Inc. (WDAY) $195.83 -3.94%
Biomarin Pharmaceutical Inc. (BMRN) $77.84 -3.90%
Microchip Technology Inc. (MCHP) $88.06 -3.86%
Cisco Systems Inc. (CSCO) $53.25 -3.86%
Autodesk Inc. (ADSK) $147.76 -3.72%
Paypal Holdings Inc (PYPL) $107.09 -3.35%
Xilinx Inc. (XLNX) $110.18 -2.89%
Seagate Technology Plc (STX) $44.93 -2.88%