A Chinese and U.S. flag at a booth during the first China International Import Expo in Shanghai, November 6, 2018.
Johannes Eisele | AFP | Getty Images
Stock futures slipped slightly early Friday morning as traders braced for an upcoming news conference on U.S.-China relations from President Donald Trump.
Dow Jones Industrial Average futures dipped 84 points, but the level implied an open of about 5 points higher. S&P 500 futures were off by 0.2% and Nasdaq 100 futures fell 0.2%.
Trump said Thursday afternoon he would hold the news conference, knocking stocks down from solid gains. That announcement came after China approved a national security bill for Hong Kong that experts warn could endanger the city's "one party, two systems" principle. That principle allows for additional freedoms that mainland China residents don't have.
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.
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.
Futures also fell after Salesforce issued disappointing guidance for the second quarter. The company expects earnings ranging between 66 cents a share and 67 cents a share. Analysts polled by FactSet expected earnings guidance of 74 cents per share. Salesforce shares dropped 4%.
The Dow closed Thursday's session down nearly 150 points, or 0.6%. The S&P 500 and Nasdaq Composite lost 0.2% and 0.5%, respectively.
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."
Despite those losses, the major averages remained on pace for solid weekly gains. The Dow and S&P 500 are up more than 2.7% each week to date while the Nasdaq has advanced 0.5%.
That weekly advance comes as traders increase bets on a successful reopening of the economy.
"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.
Federal Reserve Chairman Jerome Powell will be speaking at 11 am ET at Princeton University.
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