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Fresh US-China trade worries erase early gains for stocks

Stocks veered lower on Wall Street in afternoon trading Friday after reports that a Chinese delegation has cut short a visit to the U.S. fueled speculation that upcoming talks aimed at resolving the costly trade war between Washington and Beijing are in trouble.

The selling, which erased modest early gains for the market, came as investors reacted to published reports indicating Chinese officials canceled a planned trip to farms in Montana. Representatives from the U.S. and China were scheduled to begin preliminary meetings this week ahead of more formal negotiations set for next month.

Markets rallied this month after the U.S. and China took steps to ease tensions in advance of their next round of talks. That had fueled speculation among investors that the two countries may at least reach an interim deal in their costly trade conflict.

The reports about the Chinese delegation came after President Donald Trump told reporters during a midday press conference that he wants a complete deal with China and won’t accept one that only addresses some of the differences between the two nations.

Trump also said he doesn’t feel he needs to secure an agreement before next year’s election.

“This is why China has been reluctant to continue to negotiate with the Trump administration, because as soon as it looks like we’re moving toward some sort of constructive talks, there is a change in direction and it seems like a lot of head fakes,” said Ben Phillips, chief investment officer at EventShares.

The afternoon slide nudged the S&P 500 toward its first weekly loss in four weeks, though the benchmark index remains relatively close to its all-time high. The benchmark index has been treading water this week despite volatility caused by a swing in oil prices and the Federal Reserve’s latest interest rate cut.

Technology and communications companies slid broadly. Microsoft dropped 1.5 percent and Netflix lost 6.6 percent.

In an interview with Variety published Friday, Netflix CEO Reed Hastings acknowledged that the company faces tough competition from Disney, Apple and other companies rolling out streaming services in November. Netflix shares are down nearly 27 percent this quarter.

Retailers and other companies that benefit from consumer spending also declined. Amazon slid 1.7 percent and Starbucks fell 1.3 percent.

Financial stocks veered lower as bond yields declined. The yield on the 10-year Treasury fell to 1.76 percent from 1.77 percent late Thursday. Bond yields, which can affect interest rates on mortgages and other consumer loans, have been steadily sliding all week. American Express fell 0.9 percent.

Traders bid up shares in health care companies and utilities stocks. AbbVie added 1.7 percent and Exelon gained 1.2 percent.

Despite the small moves in the major indexes, it has been a busy week on Wall Street. On Monday, oil prices spiked more than 14 percent after a key Saudi Arabian oil processing facility was attacked. Oil prices retreated after the Saudi government said production could be restored by the end of the month, although they’re still up over 7 percent for the week.

The Federal Reserve cut interest rates for the second time this year as it tries to shore up economic growth amid a lingering trade war between the U.S. and China and weak economic growth overseas. The central bank left open the possibility of additional rate cuts if the economy weakens.

KEEPING SCORE: The S&P 500 was down 0.3 percent as of 2:11 p.m. Eastern time. The Dow Jones Industrial Average fell 89 points, or 0.3 percent, to 27,005. The Nasdaq lost 0.8 percent, weighed down by declining technology sector stocks.

ENERGIZED: McDermott International surged 24.7 percent after the energy industry contractor said it is considering selling its Lummus Technology business, which builds oil platforms and other structures. The sale consideration follows reports that the company hired an outside adviser to help restructure.

CFO EXIT: Xilinx tumbled 7 percent as its chief financial officer, Lorenzo Flores, leaves the company for Toshiba Memory Holdings, where he will be vice chairman. Flores will stay at Xilinx through its second quarter financial report.

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AP Business Writer Damian J. Troise contributed.

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