Dow slides on trade war worries

Washington excludes items from Chinese tariffs

By Anneken Tappe, CNN Business
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Traders work at the New York Stock Exchange (NYSE) on in New York City.

(CNN) - Stocks finished the week lower on Friday.

The Dow closed 160 points, or 0.6%, lower, while the S&P 500 dropped 0.5%. The Nasdaq Composite finished down 0.8%.

All three indexes dropped week-on-week, falling for the first time in three weeks. The Dow fell 1.1% from last week, while the S&P came off 0.5%. The Nasdaq registered a weekly drop of 0.7%, according to Refintiv.

All three indexes are now poised for a weekly loss.

Stocks traded in positive territory for much of the day, until a Chinese delegation in the United States canceled a scheduled visit to US farm country in Montana, according to Reuters. That sent stocks into negative territory.

"Any headline pertaining to US-China tariffs will have an effect on the tape — good and bad," said Jonathan Corpina, senior managing partner at Meridian Equity Partners. "We are starving for information relating to that topic."

Earlier, things looked better on the trade front, with Washington announcing it has excluded more items from the import tariffs on Chinese goods, according to notices from the US Trade Representative.

European and Asian markets finished mostly higher.

The 10-year US Treasury bond yield was lower at 1.722%. The US dollar, measured by the ICE US Dollar Index, is up 0.2%.

One issue that has "captured the market's attention this week is not so much the second Fed cut of this the year and prospects for a third cut, but the disruption with the plumbing," said Marc Chandler, chief market strategist at Bannockburn Global Forex, in a note to clients.

The New York Fed on Friday embarked on its fourth repo operation in a row to inject liquidity into overnight lending markets for the weekend ahead. Between Tuesday and Friday, the regional central bank injected $278 billion in the market.

These markets experienced a liquidity squeeze earlier this week, thanks to an oversupply of Treasuries and a lack of money to be put to work as companies were due to pay their quarterly tax bills.

"Precisely how the Fed addresses it, such as a standing repo facility or allowing the balance sheet to expand organically like it did through most of its history, is not yet clear, though we suspect a combination of measures will be taken," Chandler said.

Quadruple witching

Friday also marked what is known as quadruple witching, the simultaneous expiration of futures and options on stocks and indexes.

Expiring contracts like that can spur volatility in the market and lead to higher trading volumes.

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