NEW YORK (REUTERS) - Wall Street's main indexes fell on Thursday (May 9) ahead of critical trade negotiations between the United States and China, though they pared losses significantly after US President Donald Trump said reaching a deal this week was possible.
US stocks had fallen more than 1 per cent earlier in the session but recovered much of those losses after Mr Trump said he had received a "beautiful letter" from Chinese President Xi Jinping.
Negotiators will meet at 5pm EDT (2100 GMT) on Thursday, Mr Trump said. They are set to continue talks through Friday.
Still, the US has not backed down from hiking tariffs on US$200 billion (S$272 billion) worth of Chinese goods to 25 per cent on Friday.
Mr Trump also said that paperwork had been initiated to levy 25 per cent tariffs on a further US$325 billion worth of Chinese goods.
Even with the possibility of further tariffs going into effect, some investors remained optimistic that a trade agreement was within reach. That likely kept Thursday's declines in check, said Mr John Stoltzfus, chief investment strategist at Oppenheimer Asset Management.
"We may very well see tariffs put in place tomorrow, but it's going to get resolved," Mr Stoltzfus said.
"It's too impractical for either side to extend this into a protracted trade war."
The Dow Jones Industrial Average fell 138.97 points, or 0.54 per cent, to 25,828.36, the S&P 500 lost 8.7 points, or 0.30 per cent, to 2,870.72 and the Nasdaq Composite dropped 32.73 points, or 0.41 per cent, to 7,910.59.
The S&P 500 index briefly slipped below its 50-day moving average, a closely watched indicator of momentum, during the session but ended above that level.
Materials and technology stocks posted the steepest declines among the S&P 500's sectors, dropping 0.8 per cent and 0.7 per cent, respectively.
Shares of chipmakers, which get a large portion of the revenue from China, continued to slide, with the Philadelphia semiconductor index ending 1.2 per cent lower. The index has fallen 6 per cent so far this week and is on pace to post its biggest percentage weekly loss since December.
Chipmaker shares were also pressured by an underwhelming profit growth forecast from Intel Corp. Intel shares fell 5.3 per cent and were the biggest drag on the S&P 500.
Trade-sensitive industrial bellwethers were also hit, with Boeing Co shares falling 1 per cent and 3M Co shares dropping 1.9 per cent.
The CBOE Volatility Index, a gauge of investor anxiety, rose for the fourth consecutive session and is at its highest level in more than three months.
In a bright spot, Tapestry Inc shares jumped 8.5 per cent, the most among S&P companies, after the Coach handbag maker beat quarterly profit estimates and announced a US$1 billion share buyback plan.
Chevron Corp shares gained 3.1 per cent, providing the biggest boost to the Dow and the S&P 500, after the oil company said it would not raise its US$33 billion offer to buy Anadarko Petroleum Corp.
Declining issues outnumbered advancing ones on the NYSE by a 1.55-to-1 ratio; on Nasdaq, a 1.48-to-1 ratio favored decliners.
The S&P 500 posted two new 52-week highs and 11 new lows; the Nasdaq Composite recorded 37 new highs and 98 new lows.
Volume on US exchanges was 7.75 billion shares, compared with the 6.83 billion-share average for the full session over the last 20 trading days.