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Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Monday, Dec. 31, 2018.
Meanwhile, the European Commission on Thursday sharply downgraded its forecast for euro zone economic growth in 2019 and 2020, rekindling fears that the global economy may be slowing down.
“If the economy was stronger, these trade talks wouldn’t be as concerning,” said Benjamin Lau, chief investment officer of Apriem Advisors. “We think the economy is going to weaken a little bit here but … we’re still pretty optimistic about the future.”
The rising uncertainty around U.S.-China trade relations and the growing worries over the global economy coincide with a deteriorating earnings outlook for 2019.
Earnings for the first quarter of 2019 are expected to contract by more than 1 percent, according to data from FactSet. If earnings do fall, it will be the first profit contraction for the S&P 500 since the second quarter of 2016, when they fell 2.52 percent.
“Whether the pain trade of a grinding advance in equities will persist or falter, much depends on upcoming economic and earnings data, whether protectionist tensions improve/worsen and if the bond market stays calm,” strategists at MRB Partners wrote in a note.
“The technical outlook for equities looks positive, although many indexes are now approaching resistance levels. There seems to be a moderate number of investors waiting for a correction in order to add positions, which contrarily usually means that the dips will be brief,” they said.
Equities also fell Friday as chip stocks dropped. The VanEck Vectors Semiconductor ETF (SMH) dipped 0.33 percent after an analyst at Goldman Sachs said the space had gotten ahead of itself. “Our recent industry discussions suggest that memory fundamentals remain very soft, and prices continue to decline,” Goldman analyst Mark Delaney wrote.
Qorvo shares dropped more than 2.5 percent while Micron Technology lost 2.1 percent.
contributed to this report.