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Stocks close mixed amid potential US-China trade talks

CNBC logo CNBC 9/12/2018 Fred Imbert and Alexandra Gibbs

Stocks ended mixed Wednesday as traders weighed comments from a top 3M executive and a possible renewal of U.S.-China trade talks. 

Shares of 3M dropped after CFO Nick Gangestad said the company expects higher raw materials costs to be a headwind for its bottom line. Those comments sent the Dow lower after it had rallied 174 points on news of a potential restart to U.S.-China trade talks.

The index ended 27 points higher. The S&P 500 closed flat, while the Nasdaq pared losses to finish 0.2 percent lower. The tech-heavy index had dropped as much as 1.1 percent.

Dow Jones reported, citing sources, that the U.S. is proposing a new round of talks with China in the near future. The report says the talks are aimed at getting bilateral economic negotiations back on track. 

Boeing and Caterpillar, two bellwethers for global trade, rose on the news. 

Quincy Krosby, chief market strategist at Prudential Financial, said this is a positive for the market, but added: "We'll need to see some follow-through to take trade out of the risk column." 

Prior to Wednesday's report, trade tensions between the two largest economies in the world have been increasing lately. 

China will seek permission from the World Trade Organization to inflict sanctions upon the U.S. as tensions between the two largest global economies continue. Last Friday, President Donald Trump told reporters that he was "ready to go" on hitting China with an additional $267 billion worth of tariffs, on top the already $200 billion in tariffs, previously announced. 

The tensions pushed the S&P 500 off a record level reached late last month. Pressure in tech shares also contributed to the index's easing from the all-time high. The S&P 500 tech sector is down 1.8 percent through Tuesday's close. 

Tech's decline resumed on Wednesday as shares of chipmakers fell sharply. 

The VanEck Vectors Semiconductor exchange-traded fund (SMH) fell 1.9 percent, led by a decline in Micron. Shares of Micron dropped more than 5 percent after Goldman Sachs downgraded them to neutral from buy, citing a "snowballing" decline in memory-chip demand. 

Shares of Dow-member Intel fell 0.7 percent while Applied Materials and Lam Research pulled back 2.4 percent and 2.7 percent, respectively. 

Semiconductor stocks have been under pressure lately amid heightened concerns of slowing memory-chip demand, helping drag the broader tech space lower. The SMH has dropped more than 3 percent this month while the S&P 500 tech sector is down 1.8 percent through Tuesday's close.

Tech shares have also fallen amid increasing regulatory pressure toward social media companies, especially Facebook and Twitter. Facebook shares slipped 1.3 percent while Twitter dropped 2.5 percent. 

Apple shares, meanwhile, fell more than 1.5 percent ahead of an expected unveiling of new iPhone models. 

Equities closed higher on Tuesday as a rebound in tech shares led the gains. The Dow rose more than 100 points while the S&P 500 and Nasdaq gained 0.4 percent and 0.6 percent, respectively. 

"This kept the [S&P 500] above last Friday's lows, allowing the most recent peak-to-trough move to remain at -1.8%," said Frank Cappelleri, executive director at Instinet. 

"This lines up with the magnitude of the two most recent pullbacks. Could two very bad sessions suddenly destroy this persistent advance? Yes, and that has been the risk since the April lows (and for all of 2017, for that matter)," Cappelleri said in a note. "But simply thinking it is due hasn't been enough."


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