U.S. markets and stock ETFs retreated Friday as heightened tensions between the United States and China, along with rising coronavirus cases, weighed on investor sentiment.
On Friday, the Invesco QQQ Trust (NASDAQ: QQQ) was down 1.3%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) dropped 0.8%, and SPDR S&P 500 ETF (NYSEArca: SPY) fell 0.9%.
U.S. equities were on pace to mark their first weekly decline in four after the ongoing Covid-19 pandemic spiked in recent weeks and infected over 4 million Americans, adding to fears of a prolonged economic recovery process, Reuters reports.
“U.S. equities are in consolidation mode for a good reason. We’ve seen a strong performance in the last three months,” Terry Sandven, chief equity strategist at U.S. Bank Wealth Management, told Reuters. “When you look further into the second half of the year, there’s reason to expect some volatility in the broad market … the duration and impact of COVID-19 is still unknown.”
The equity markets have previously made a sharp recovery on optimism over a potential coronavirus vaccine and copious stimulus, but the lingering uncertainty will continue to weigh on markets.
Further adding to the volatility on Friday, Beijing ordered Washington to close its consulate in the city of Chengdu in what is seen as a retaliatory act days after the U.S. ordered the closure of the Chinese consulate in Houston. The closures marked another escalation in the deteriorating relations between the two countries, which have clashed over trade, technology, handling of the coronavirus pandemic and global influence, the Wall Street Journal reports.
“Today’s act by China is seen as an actual political retaliation, as opposed to the typical verbal scuffles that had been going on,” Ong Zi Yang, senior macro analyst at FSMOne.com, told the WSJ. “The escalation in geopolitical tensions has encouraged varying degrees of profit-taking among investors, especially as Chinese equities have rallied quite significantly since the global equities sell-down in March.”
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