The S&P 500 rose slightly on Friday, erasing losses earlier in the session, as traders breathed a sigh of relief after President Donald Trump signaled no changes to the trade deal with China despite rising tensions.
The U.S. equity benchmark finished the session up 0.4%, or 14.58 points, at 3,044.31. The Dow Jones Industrial Average fell 17.53 points, or less than 0.1%, to 25,383.11 as American Express and JPMorgan weighed. The 30-stock index ended the day well off the lows as it was down as much as 368 points at one point. The Nasdaq Composite jumped 1.2%, or 120.88 points, to 9,489.87 as chip stocks rallied.
The S&P 500 and the Dow gained 3% on the week, bringing their advance in May to 4.5% and 4.2%, respectively. The tech-heavy Nasdaq rose 1.7% this week, pushing its rally this month to 6.7%.
During a much-awaited news conference, Trump said he would take action to eliminate special treatment towards Hong Kong. However, he did not indicate the U.S. would pull out of the phase one trade agreement reached with China earlier this year, easing trader concerns for the time being.
“Basically the items he could have talked about he chose not to talk about, but it’s not an end point,” said Julian Emanuel, chief equity and derivatives strategist at BTIG. “It’s a continuation on the way to more tensions.”
The iShares PHLX Semiconductor ETF (SOXX) jumped to its session high following the news conference, ending the day 2.5% higher. Marvell Technologies and Nvidia were among the biggest gainers in the ETF, rising 8.8% and 4,6%, respectively.
The news conference comes after China approved a national security bill for Hong Kong that experts warn could endanger the city’s “one country, two systems” principle. That principle allows for additional freedoms that mainland China residents don’t have.
Tensions between China and the U.S. have risen lately as Trump criticizes the Chinese government’s response to the coronavirus outbreak. U.S. lawmakers have also been critical of China increasing its stronghold over Hong Kong.
White House economic advisor Larry Kudlow said Friday that people in Hong Kong are “furious,” adding: “the U.S. government is … I’ll use the word furious at what China has done in recent days, weeks and months. They have not behaved well and they have lost the trust, I think, of the whole Western world.”
JPMorgan strategist Marko Kolanovic, who called the comeback for the market in March, said Thursday evening he was turning more cautious because of a possible economic clash with China.
“A complete breakdown of supply chains and international trade, primarily between the two largest economies (US and China), would justify equities trading drastically lower,” Kolanovic wrote.
Paul Christopher, head of global market strategy at Wells Fargo, said he expects more rhetoric from the U.S. regarding Hong Kong and China, noting: “It could end up being a headwind once the market finishes pricing in all of this hopium.”
Still, the market has had a massive run on optimism about economic reopening, with the S&P 500 bouncing about 38% off its March low. The benchmark is about 10% below its record high set in February.
“The market has discounted the coronavirus very quickly and has correctly predicted the apex of the virus,” said Mike Katz, partner at Seven Points Capital. “Having said all that, prices are up there. The S&P 500 trading above 3,000 is pricing in a full recovery.”
“If there is a second wave of the virus that ends up being more detrimental than people think, then I would think the S&P 500 is not valued correctly,” said Katz.
—CNBC’s Yun Li and Patti Domm contributed to this report.