US close: Stocks end off lows as energy sector lends a hand; trade war fears weigh
US stocks ended mostly down but off earlier lows on Monday as the energy sector lent a hand, with escalating tensions between the US and China undermining investor sentiment.
The Dow Jones Industrial Average fell 0.4% to 24,987.47and the S&P 500 closed down 0.2% at 2,773.87, while the Nasdaq ended broadly flat but in positive territory at 7,747.02.
On Friday, Trump announced 25% tariffs on up to $50bn worth of Chinese imports. China then retaliated by announcing 25% tariffs on $34bn-worth of imports from the US.
Oanda analyst Craig Erlam said: "We're seeing a slightly risk-averse tone in financial markets at the start of the week after the trade spat between the US and China ramped up over the weekend.
"Both countries have laid out plans to impose tariffs on one another on 6 July which is making investors a little uncomfortable, more so due to the potential for the situation to escalate further than the tariffs themselves. The question now is how much pain both sides will be willing to inflict on the other - and themselves in the process - before coming to an agreement that removes tariffs and eases investor concerns."
Elsewhere, oil prices rallied ahead of the OPEC meeting at the end of the week, with the cartel set to discuss reducing or even ending the coordinated output cut that was imposed to try to bring inventories back in line with the five-year average.
"An increase in production from the OPEC nations and others including Russia involved in the deal will be welcomed by Trump who has recently been berating them for pushing prices higher, despite the fact that part of this has been driven by US sanctions on Iran," Erlam said.
West Texas Intermediate was up 1.2% to $65.82 a barrel, while Brent crude gained 2.4% to $75.26, helping to boost energy sector.
In corporate news, electric car maker Tesla ended in the black after chief executive Elon Musk showed off the company's newest production line over the weekend on Twitter.
Elsewhere, WP Carey closed lower after announcing a proposed merger with Corporate Property Associates in a stock-for-stock deal valued at around $6bn.
Valeant Pharmaceuticals' US-listed shares slumped 12.3% after the US health regulator declined to approve the company’s plaque psoriasis treatment lotion.
On the data front, the National Association of Home Builders' housing market index for June showed that sentiment among US housebuilders deteriorated due to sharply higher lumber prices.
The NAHB/Wells Fargo housing market index slipped two points from May to 68.
The index of current sales conditions fell one point to 75, while the component gauging expectations in the next six months and the metric charting buyer traffic also dropped one point to 76 and 50, respectively.
Regionally, on a three-month moving average, the index for builder sentiment in the Northeast was up two points to 57, while the gauges for the West and Midwest were unchanged at 76 and 65, respectively, and the index for the South slipped one point to 71.
NAHB Chairman Randy Noel said: "Builders are optimistic about housing market conditions as consumer demand continues to grow. However, builders are increasingly concerned that tariffs placed on Canadian lumber and other imported products are hurting housing affordability. Record-high lumber prices have added nearly $9,000 to the price of a new single-family home since January 2017."
NAHB chief economist Robert Dietz said: "Improved economic growth, continued job creation and solid housing demand should spur additional single-family construction in the months ahead. However, builders do need access to lumber and other construction materials at reasonable costs in order to provide homes at competitive price points, particularly for the entry-level market where inventory is most needed."