NEW YORK – U.S. stocks inched lower Friday as bond yields jumped, a shift that helped banks but hurt companies that pay big dividends. The dollar fell after President Donald Trump said China is manipulating its currency.
Companies including Microsoft and Honeywell rose as investors were pleased with their quarterly reports, but General Electric stumbled. Stocks wobbled all week as investors reacted to solid company results as well as heightened trade tensions. The S&P 500 index was virtually flat for the week while the Russell 2000 index, which is made up of smaller companies that do more business inside the U.S., rose 0.6 percent.
In the last two days Trump criticized the Federal Reserve for raising interest rates, said he’s willing to put tariffs on all U.S. imports from China, and said China, the European Union and others are harming the U.S. by weakening their currencies and reducing interest rates. Stocks weren’t affected, but the dollar declined and short-term bond yields slipped, suggesting investors wondered if the Fed might raise interest rates more slowly.
“If there’s a tossup between raising and not raising [rates], you wonder what role these types of comments might possibly play,” said Sameer Samana, a strategist for the Wells Fargo Investment Institute.
Samana said he doesn’t think the Fed will make big changes to its policies based on Trump’s comments, even if the president starts advocating more forcefully for lower rates. But it’s something investors will have to think about.
“We think the Fed has independence and they’ll continue to do the right thing,” he said. “This is one more item that just creates noise in markets.”
The S&P 500 index dipped 2.66 points, or 0.1 percent, to 2,801.83. The Dow Jones industrial average lost 6.38 points to 25,058.12. The Nasdaq composite gave up 5.10 points, or 0.1 percent, to 7,820.20. The Russell 2000 index of smaller-company stocks fell 4.50 points, or 0.3 percent, to 1,696.81.
Short-term bond yields inched higher. The yield on the two-year Treasury note rose to 2.60 percent from 2.59 percent.
In a taped interview with CNBC, Trump said “I’m willing to go to 500,” referring roughly to the $505.5 billion in goods the U.S. imported last year from China. Earlier this month the U.S. placed import taxes on $34 billion in goods imported from China and Beijing responded in kind. The Trump administration is considering tariffs on another $200 billion in goods.
The People’s Bank of China weakened the country’s currency against the dollar on Friday. If the yuan continues to depreciate, goods exported to China will become more expensive to consumers there and Chinese exports would also be relatively cheaper. That could balance out suggested increases in tariffs by the Trump Administration.