Stocks gave up an early rally and ended slightly lower Thursday as traders feared additional tensions with China and as President Donald Trump escalated his war on social media companies.
Trump signed an executive order Thursday to limit the liability protections that have served as a bedrock for unfettered speech on the internet.
The president’s abrupt action against social media platforms sparked immediate criticism and was almost certain to spark future legal challenges.
The move came after Trump lashed out at Twitter for fact checking two of his tweets earlier this week.
Trump said the fact checks were “editorial decisions” by Twitter and amounted to political activism. He said it should cost those companies their protection from lawsuits for what is posted on their platforms.
Trump and his allies, who rely heavily on Twitter to verbally flog their foes, have long accused the tech giants in liberal-leaning Silicon Valley of targeting conservatives on social media by fact-checking them or removing their posts.
“We’re fed up with it,” Trump said, claiming the order would uphold freedom of speech.
The early gains the market had earlier in the day evaporated by the closing bell.
The Dow Jones Industrial Average fell 147.63 or .58% to 25,400.64.
The NASDAQ composite index gave up 43.37 or .46% to 9.368.99.
The S&P 500 dropped 6.40 or .21% to 3,029.73. The broader measure of American business had been up 1.1% before sinking in the last hour after Trump said he would hold a news conference on China Friday.
The president’s announcement came after China’s legislature endorsed a national security law for Hong Kong that has strained relations with the U.S. and prompted new protests.
The S&P 500 had been on track for its fourth straight gain, which would have been its longest winning streak since February, before the coronavirus lockdowns began.
The day started modestly higher Thursday as investors continued to pin their hopes on an economic rebound from the coronavirus pandemic.
Health care companies and makers of consumer products were among the biggest winners in early trading. The modest gains came even as more dire reports on the economy came into view.
The market has been mostly unaffected by weekly unemployment numbers that have now topped 40 million since the beginning of the crisis.
The Labor Department announced Thursday that another 2.1 million Americans applied for unemployment benefits last week, a sign that companies are still slashing jobs in the face of a deep recession even as more businesses reopen and rehire some laid-off employees.
Investors are keeping an eye on the growing tensions with China over Hong Kong. President Trump said earlier this week that he was working on a response to Beijing’s legislative moves to establish more authoritarian control over the region but he declined to give details.
The latest
About 41 million people have now applied for aid since the virus outbreak intensified in March, though not all of them are still unemployed. The Labor Department’s report Thursday includes a count of all the people now receiving unemployment aid: 21 million.
The pace of layoffs has declined for seven straight weeks, a sign that the cratering of the job market may have bottomed out. By historical standards, though, the number of weekly applications remains enormous.
The situation with China
China’s legislature endorsed a national security law for Hong Kong on Thursday that has strained relations with the United States and Britain and prompted new protests in the territory.
The National People’s Congress approved the bill as it wrapped up an annual session that was held under intensive anti-coronavirus controls. The vote was 2,878-1 with six abstentions, in line with the high-profile but largely ceremonial body’s custom of near-unanimous support for all legal changes decided by the ruling Communist Party.
On Wednesday, U.S. Secretary of State Mike Pompeo told Congress the Trump administration no longer regards Hong Kong as autonomous from mainland China. That sets the stage for the U.S. to withdraw the preferential trade and financial status Hong Kong has held since it reverted to Chinese rule 23 years ago.
While Hong Kong’s role as a regional trading center and financial hub has been to a large extent sidelined by developments on the Chinese mainland, removing its special status would be a huge blow to businesses located in the city because of its independent financial and legal systems.
With U.S. Commerce Secretary Wilbur Ross saying President Donald Trump has a “’whole menu’ of options, the market is on edge to hear exactly what those measures are, and how China absorbs them," Chris Weston of Pepperstone said in a commentary.
“This is a risk for markets and the situation is clearly fluid — one questions if the equity markets are too complacent here?” Weston said.
Trump vs. social media
Tech stocks were down slightly in early trading Thursday, but rebounded some. President Trump was said to be preparing an executive order Thursday aimed at curbing liability protections for social media companies, two days after he lashed out at Twitter for applying fact checks to two of his tweets.
“This will be a Big Day for Social Media and FAIRNESS!” Trump tweeted Thursday morning.
Some of Trump’s Republican allies in Congress have questioned whether platforms like Twitter and Facebook should continue to enjoy liability protections as “platforms” under federal law or be treated more like publishers, which can face lawsuits over content.
The protections have been credited with allowing the unfettered growth of the internet for more than two decades, but now some Trump allies are advocating social media companies face more scrutiny.
The draft executive order was expected to argue that actions like Twitter's fact check labeling meant they should lose the protections of being a “platform.” Even if upheld by regulators and federal courts, it was not clear how that could affect the company's effort to fact check Trump's tweets.
The order was also expected to try to hold back federal advertising dollars from Twitter and other social media companies that “violate free speech principles.”
Twitter’s first use of a label on Trump’s tweets comes as platforms gear up to combat misinformation around the U.S. presidential election. Twitter and Facebook have begun rolling out dozens of new rules to avoid a repeat of the false postings about the candidates and the voting process that marred the 2016 election.
Around the world
Shares rose in Paris, London and Tokyo but dropped in Hong Kong, where tensions are flaring over Beijing’s effort to exert more control over the former British colony.
Recent developments in the region are keeping markets on edge, particularly in Asia.
Two pro-democracy lawmakers were ejected from Hong Kong’s legislative chamber Thursday morning, at the start of a second day of debate on a contentious bill that would criminalize insulting or abusing the Chinese national anthem.
China’s ceremonial legislature approved a national security law Thursday, overriding protests from critics who say it could further undercut semi-autonomous Hong Kong’s civil liberties.
Hong Kong’s Hang Seng index lost 0.7% to 23,132.76, while the Shanghai Composite index gained 0.3% 2,846.22.
Tokyo’s Nikkei 225 index jumped 2.3% to 21,916.31, lifted by the latest, $1.1 trillion, infusion of stimulus for Japan’s moribund economy. India's Sensex gained 1.6% to 32,114.81, despite news of another record increase in the number of new coronavirus cases. The S&P/ASX 200 in Sydney climbed 1.3% to 5,851.10.
South Korea’s Kospi edged 0.1% lower after health authorities reported 79 new cases of coronavirus in the latest setback for the country’s recovery from the pandemic.
That news undid any boost from the South Korean central bank’s decision to lower its policy rate to an all-time low of 0.5% to soften the pandemic’s shock to the country’s trade-dependent economy.
The Bank of Korea has said the economy may shrink for the first time in 22 years. Its rate cut followed another two months ago, which was its first since 2008.
Germany’s DAX gained 0.5% to 11,711 and the CAC 40 in Paris climbed 0.5% to 4,731. Britain's FTSE 100 picked up 0.8% to 6,192. The future for the S&P 500 was up 0.1% while the future for the Dow industrials gained 0.5%, auguring early gains on Wall Street.
Oil, bond yields, the dollar
U.S. crude oil for delivery in July lost 23 cents to $32.58 per barrel in electronic trading on the New York Mercantile Exchange. It fell $1.54 on Wednesday to settle at $32.81 per barrel. July Brent crude, the international standard, gave up 11 cents to $35.34 per barrel.
In other trading, bond yields were mixed. The yield on the 10-year Treasury slipped to 0.68% from 0.69% late Wednesday.
The dollar bought 107.75 Japanese yen, up from 107.72 yen late Wednesday. The euro slipped to $1.1001 from $1.1006.
— Compiled and edited by ArLuther Lee for The Atlanta Journal-Constitution.
