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Stocks close little changed after recovering from deep dive

CNBC logo CNBC 5/3/2018 Fred Imbert and Sam Meredith
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Stocks jumped off session lows Thursday, slashing steep losses seen earlier in the day, to close little changed. 

The Dow ended 5 points higher after falling nearly 400 points. The S&P 500 shed 0.23 percent after dropping as much as 1.6 percent. Both indexes dipped below their 200-day moving averages but were back above those levels by the close. The Nasdaq slipped 0.18 percent after dropping more than 1 percent. 

Equities fell sharply earlier in the session as a batch of better-than-expected earnings failed to push the major averages higher while trade and geopolitical worries mounted.

Tesla reported better-than-forecast quarterly results Wednesday after the close. However, the stock fell 6 percent after CEO Elon Musk dismissed questions from analysts regarding gross margins and Model 3 production.

Meanwhile, Church & Dwight, Blue Apron and Express Scripts also posted results that beat the Street.

"The fact is the market has not been able to rally with strong earnings," said Bruce Bittles, chief investment strategist at Baird. "That tells you two things: A lot of that has already been priced in, and that there may not be too much cash out there."

Treasury Secretary Steven Mnuchin is leading a group of Trump administration officials to meet with Chinese Vice Premier Liu He and discuss trade between the two nations.

Shortly before the talks were set to take place in Beijing, the mood between the world's two largest economies worsened amid reports the U.S. administration is considering taking executive action to restrict some Chinese firms' ability to sell telecoms equipment.

Wednesday night, President Donald Trump said in a tweet the group of administration officials "is in China trying to negotiate a level playing field on trade! I look forward to being with President Xi in the not too distant future."

"Trump's 'level playing field' implies a harder line and general sentiment around the talks is going to be volatile," said Tom Essaye, founder of The Sevens Report. "Chances of a grand bargain are virtually nil but the market does want a de-escalation of trade tensions."

Meanwhile, Iran Foreign Affairs Minister Mohammad Javad Zarif said the country will not renegotiate the nuclear deal it struck with the U.S. in 2015. Zarif said in a YouTube video: "Iran will not renegotiate what was agreed years ago and has been implemented ... also we will reject any ratification of it."

Gold futures jumped 0.6 percent to $1,314 per ounce. The precious metal is often seen as a safe-haven trade.

Wall Street also paid attention to Washington amid more news regarding Trump's legal troubles. In an interview with Fox News, Rudy Giuliani, one of the lawyers representing the president in the special counsel's probe, said Trump repaid his personal lawyer Michael Cohen for a hush payment to porn star Stormy Daniels.

His statements appear to contradict the version of events told by both Trump and Cohen about the payment.

"We're facing a dual headwind of trade wars and noise" around the Mueller investigation, said Art Hogan, a chief market strategist at B. Riley FBR. He noted the market had recently been ignoring news about Trump's legal troubles as corporate earnings results flooded the news cycle.

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