Wall St. flattens out into Labor Day weekend

By Akanksha Rana

(Reuters) – Gains on Wall Street petered out on Friday, with the Nasdaq index turning negative, as an upbeat mood fueled by signs of upcoming U.S.-China trade talks and solid domestic consumer spending data, waned ahead of a long Labor day weekend.

The three main indexes opened higher, following data which showed strong U.S. consumer spending in July and signals from Washington and Beijing on Thursday, that they will resume trade talks, as the countries discussed the next round of in-person negotiations in September.

With analysts saying investors were taking money off the table ahead of Labor Day weekend, by midday only the Dow Jones Industrial Average (DJI) was clearly in positive territory.

“Frankly, markets have been overly optimistic about trade,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab (NYSE:SCHW) in Austin.

“I would caution people to be a little careful because optimism won’t last if it doesn’t ultimately materialize into something substantive like an agreement which I just have a hard time seeing it happen.”

A sharp heightening of tensions this month after the U.S. and China slapped tariffs on each other’s goods, caused panic across global markets and resulted in a key part of the U.S. yield curve, a closely-followed recession indicator, inverting.

That has Wall Street’s main indexes on course for monthly losses of up to 3%. Still, the markets are also on course for their best weekly gain since June and the benchmark S&P 500 (SPX) is now just 3.6% away from a record high hit in July.

Markets are also bracing for a new round of U.S. tariffs on some Chinese goods to come into effect on Sunday and the technology sector (SPLRCT) was the biggest weight on the S&P with a 0.3% loss.

Ulta Beauty Inc (O:ULTA) tumbled 28.8%, to the bottom of the S&P 500, after the cosmetics company cut its full-year profit forecast.

Hopes that the Federal Reserve would step in to impede any slowdown in economic growth as a result of the trade war, have led traders to fully price in an interest rate cut at the next meeting of the U.S. central bank in mid-September.

A monthly jobs report and manufacturing data next week will add fuel for thought on the health of the U.S. economy.

At 11:52 a.m. ET, the Dow Jones Industrial Average (DJI) was up 32.06 points, or 0.12%, at 26,394.31, the S&P 500 (SPX) was down 0.60 points, or 0.02%, at 2,923.98. The Nasdaq Composite (IXIC) was down 26.92 points, or 0.34%, at 7,946.48.

The biggest gainer on the benchmark index was Campbell Soup Co (N:CPB), which jumped 8.7% after its quarterly profit beat estimates.

Advancing issues outnumbered decliners by a 1.22-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.09-to-1 ratio on the Nasdaq.

The S&P index recorded 34 new 52-week highs and no new low, while the Nasdaq recorded 32 new highs and 41 new lows.