Dec 6, 2018, 4:38 PM ET

Dow ends flat, paring early losses after Chinese tech exec's arrest

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The Dow Jones Industrial Average ended flat Thursday, paring intraday losses of nearly 800 points that were stoked by fears of a sidelined trade deal after a Chinese telecom executive was arrested in Canada on behalf of the U.S., adding to concern about trade tensions with China.

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The Dow recovered on hopes that the Federal Reserve would slow rate hikes, traders said.

The index closed 0.3 percent lower at 24,948 points.

"Investors initially took the arrest of Chinese telecom giant Huawei’s chief financial officer as a negative signal on U.S.-China trade relations only to erase most of those losses by the close on hopes the Fed will slow its interest rate hikes to boost the economy," Alec Young, managing director of Global Markets Research, FTSE Russell told ABC News.

PHOTO: Traders work on the floor of the New York Stock Exchange in New York, Dec. 2018.Justin Lane/EPA via Shutterstock
Traders work on the floor of the New York Stock Exchange in New York, Dec. 2018.

The tech heavy Nasdaq ended half a percent lower at 7,188 points, and the S&P 500 also closed the day basically flat, down 0.2 percent at 2,696.

The market is still down for the week on nagging concerns that a trade deal with China would not be reached. Fears of an upcoming recession also persisted.

Canadian authorities arrested Huawei CFO Meng Wanzhou on behalf of the U.S. over the weekend. Huawei is the world's largest telecommunication equipment company and second largest smartphone maker behind Samsung. Wanzhou is the founder's daughter and heir apparent.

Huawei is also an example of what the Trump administration is targeting in its trade dispute with China. It receives preferential treatment and is heavily subsidized by the Chinese government while purchasing technology from U.S. companies like Qualcomm.

The move by the U.S. is related to concerns that Beijing could be using Huawei's technology to spy on Americans. The Justice Department also believes Huawei is violating U.S. sanctions against Iran.

The political moved rattled investors.

"Traders are reducing the odds of a trade deal with China since the arrest of Huawei’s CFO," Michael Matousek, head trader at U.S. Global Investors, told ABC News. "Also, talk about the probability of recession has been gaining traction due to the yield curve getting close to inverting."

The spread on the yield curve is the difference in the yields between the two-year government note minus the 10-year government bond.

"When interest rates for shorter-term securities is greater than the longer-term securities, borrowing becomes more expensive, so consumers tend to slow purchases and businesses have less expansion. In time, this causes a slowdown in the economy and possibly a recession. Investors seem to be worried that the possibility of a recession might be looming," Matousek added.

PHOTO: A trader works on the floor of the New York Stock Exchange at the closing bell in New York, Dec., 4 2018.Justin Lane/EPA via Shutterstock
A trader works on the floor of the New York Stock Exchange at the closing bell in New York, Dec., 4 2018.

President Trump had tweeted over the weekend that a deal had been reached. But his administration could not provide any details, stoking market concerns about the overall economy.

Doubts over a trade deal with China contributed to the Dow's drop of 800 points on Tuesday.

Markets were closed Wednesday for a federal holiday in honor of the late President George H.W. Bush.

ABC News’ Karson Yiu contributed to this report.

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  • John Rettinger

    Debentures of Medical Corporations show significant revenue short-falls. Pharmaceutical Companies and other areas of medical practice receive strict payments by the US Government. Medical Conglomerates should focus on private medical insurance or cash payments for income. Investors require strong rates of revenues to improve corporate bond cash yields and dividends.

  • CaptnBlynd

    There is no reason I should have to point out that anyone can search and get a graph of the DOW for the last few years.
    Stocks are not down in long term.
    January 6 2017 19,963
    January 2 2018 24,824
    Today 25,027

    %25 over 2 years is not enough for you?

    BTW Anyone who believes that our markets will continue up while South America falls into ruin is a fool. Of course, I have always considered anyone who would invest in a market which would drop due to the arrest of one tech company executive foolish. Stocks should be valued on assets and profits of companies. Stocks are valued by the price stocks are selling for. Stick your money in that slot machine if you want. A paid off modest home will generate very satisfactory internal profit. So pay off your mortgage.

    Average monthly rent in US $1,200 (one of the low figures I found)x 12 = $14,400 not going out per year on average.

    I realized return on investment of over $14,000 not investing in the market this year. What did you make on stocks?

  • mtntrek3

    Well, we have tax breaks, mainly for big corp's and the top few percentile along with some deregulation of banks (the big $ boys and girls applaud)... and tariffs thrown into the mix for good measure. So,market bubbles increase along with main street not doing so well. Not good...

  • Mick

    Anyone with half a brain laughs at Trump behind his back. Trump is a running-joke of planet earth.

  • Mick

    We have nothing to worry about because Trump is a "genius" and is smarter than everyone in the world. After all he was so good at running his business and only went bankrupt 6 times stiffing 1000,s of contractors and their family's. If you thought that was bad wait till you see what he does to the economy.

  • mm

    The market people are so fragile, the slightest hint something is wrong and they pull the money. It will recover because they are gamblers and addicted to playing the market.

  • Save America from Ourselves

    Let's put tRump's biggly brain and "smarter than everyone else" mentality in REAL FACTUAL TERMS:

    * Trade Deficit - Oct & Feb of 2018 recorded the highest and second highest deficit since Sep 2008 (GW Busch)
    * Tariffs - Bringing in billions of revenue (taxes), paid by importer (mostly US companies) with majority paid for by consumers NOT the exporter (China, etc.). How's that tax cut working out for the middle class?
    * Some farmers are struggling to survive do to tariffs.
    * Consumer costs are rising in some industries.
    * Healthcare costs continue to rise.
    * Pharmaceutical prices are skyrocketing.
    * Unemployment flattening (4.1 to 3.7 for the last 12 months)
    * Jobs creation slowing (last 22 months under Obama 4,598, fist 22 months under tRump 4,252, in thousands)
    * Stock market volatility - percent change 23 months into term (Obama +44.7%, tRump +25.6%)
    * Approval rating - tRunp 42.1% (lower than ANY President since WWII, 23 month into term)

    Winning????

  • Disqus 30

    You guys either don't invest or don't know what you're doing if this is freaking you out.

    -2008 crash

  • Citizen123

    These market gyrations are not healthy for investor confidence.

  • Starderup

    The Orange Moron is lucky that trading was halted Wednesday, or the bloodbath to all our 401(K)s would have been worse.

  • Stephen Bishop

    Meanwhile, to date, Trump has spent $400,000 on golf cart rentals alone.

  • Donnie Dumpster Fire

    The dow's crashing, it's only a matter of a few more weeks of all the bad vs crooked poker players trying to back out of the saloon, guns drawn, looking for the closest exit before the bloodbath begins.

  • lainsmo

    What a wild ride. Still, I'm happy for any bounce that lets me short some of my lesser stuff.

  • owthathurts

    All aboard the latest dead-cat bounce!

  • Your Worst Nightmare

    A crazy market reacting to an insane administration. The Chaos President is exactly what stock market hates. He brings, uncertainty and ignorance to the process, both of which cause massive disruptions and the wild swings we've been seeing the past month. Trump's tariffs are harmful because of their potential for hurting profits but the most severe harm is caused by the unknowns created by what appears to be an out of control leader who can reverse course in seconds.

  • SJC

    Trump is determined to get us in a trade war.

  • Troyal

    2 hours ago people were acting like the sky was falling. Dow and S/P almost even on the day, NASDAQ finished green. Yesh.

  • Disqus 30

    You were wrong, the world didn't end.

    -2009 Crash

  • My_Two_Bits

    I'm sure everything will be fine. I mean, it's not like the market is over artificially high or anything....

  • Manuel Hernandez

    The people who trade stocks need to get a grip. Selling off because some exec got fingered is dumb. They need to trade based on the balance sheet of the Comapanies they are trading. This is SO self fulfilling it's terrible. I don't have a penny in the stock market and am SO happy.

  • Former Earthling

    Meanwhile Trump is gloating about his 50% approval rating from one right leaning rasmussen poll.

  • mollydtt

    What do you expect? The GOP congress keeps telling Trump “that’s good. Real good.”

    Each member is afraid that if they don’t, Trump will banish them to the cornfield.

  • Former Earthling

    Really tired of all this winning.