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U.S. Stocks See Further Downside On Trump Comments About Trade

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Stocks have moved sharply lower over the course of the trading day on Friday, partly offsetting the rally seen in the previous session. The major averages have seen further downside after coming under pressure early in the day.

Currently, the major averages are just off their worst levels of the day. The Dow is down 215.76 points or 0.8 percent at 26,162.43, the Nasdaq is down 110.62 points or 1.4 percent at 7,928.53 and the S&P 500 is down 31.31 points or 1.1 percent at 2,906.78.

The pullback on Wall Street comes after President Donald Trump told reporters the U.S. is "not going to do business" with Chinese tech giant Huawei.

"And I really made the decision. It's much simpler not doing any business with Huawei," Trump said. "That doesn't mean we won't agree to something if and when we make a trade deal."

Trump also indicated he is "not ready" to make a trade deal with China, suggesting the U.S. could skip the next round of trade talks in September.

"We'll see whether or not we keep our meeting in September," Trump said. "If we do, that's fine. If we don't, that's fine."

The comments from Trump come after a report from Bloomberg said his administration is holding off on decisions about licenses for U.S. companies to restart business with Chinese tech giant Huawei.

Trump previously said his administration would make "timely licensing decisions" but has reportedly decided to delay the decisions in response to China halting its purchases of U.S. agricultural products.

China decided to stop buying U.S. agricultural products in retaliation against Trump's announcement last week that he plans to impose a 10 percent tariff on the remaining $300 billion worth of Chinese imports.

The report is weighing on U.S. chipmakers, which require a special license to sell goods to Huawei after the company was added to a U.S. trade blacklist in May over national security concerns.

In U.S. economic news, the Labor Department released a report showing a modest increase in producer prices in the month of July.

The Labor Department said its producer price index for final demand rose by 0.2 percent in July after inching up by 0.1 percent in both May and June. The uptick in prices matched economist estimates.

Meanwhile, the report said core producer prices, which exclude food and energy prices, edged down by 0.1 percent in July after climbing by 0.3 percent in June.

The modest pullback in core producer prices came as a surprise to economists, who had expected core prices to rise by 0.2 percent.

"The decline in core producer prices in July confirms that underlying price pressures remain subdued," said Andrew Hunter, Senior U.S. Economist at Capital Economics.

He added, "At the margin, that makes it a little more likely that Fed officials will react to any further signs of weakness in the real economy by cutting interest rates again."

Sector News

Steel stocks have moved sharply lower over the course of the trading session, dragging the NYSE Arca Steel Index down by 3 percent. The index is on pace to end the session at its lowest closing level in almost three years.

Substantial weakness has also emerged among tobacco stocks, as reflected by the 2.5 percent nosedive by the NYSE Arca Tobacco Index.

Semiconductor stocks also continue to see considerable weakness in reaction to the Huawei news, with the Philadelphia Semiconductor Index slumping by 2.2 percent.

Oil service, biotechnology and networking stocks have also shown notable moves to the downside amid broad based weakness on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan's Nikkei 225 Index rose by 0.4 percent, while China's Shanghai Composite Index slid by 0.7 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the U.K.'s FTSE 100 Index fell by 0.4 percent, the French CAC 40 Index tumbled by 1.1 percent and the German DAX Index slumped by 1.3 percent.

In the bond market, treasuries have pulled back near the unchanged line after moving modestly higher earlier in the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by less than a basis point at 1.710 percent.

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