By Sinéad Carew
NEW YORK (Reuters) - U.S. stocks were in the red on Friday afternoon as investors were wary after mixed data and ahead of a holiday weekend in which a fresh round of U.S. tariffs on Chinese imports were due to kick in.
While Wall Street was on course to register a weekly gain, August was expected to show its biggest monthly decline since May after escalations in U.S.-China trade tensions and the inversion of a key part of the U.S. yield curve which is often a recessionary signal.
Wall Street markets will be closed on Monday for the U.S. Labor Day holiday. Since bonds have recently outperformed stocks, investors may have taken early action to rebalance their portfolios for the end of the month due to the long weekend, according to Vinay Pande, head of trading strategies at UBS Global Wealth Management in New York.
"Trying to make a very large move in the last day of the month when Labor day is following is not the best idea," said Pande. "Most of the rebalancing that was expected ... has likely been accomplished in the days leading up to the long weekend."
U.S. consumer spending increased solidly in July as households bought a range of goods and services. While this could allay financial market fears of a recession, a survey from the University of Michigan, also out Friday, showed its consumer sentiment index in August dropping by the most since December 2012, amid nerves over the U.S.-China trade war.
"The news today has been mixed. There was positive news about consumption data and negative news on consumer confidence," said Pande.
At 2:57 p.m. ET, the Dow Jones Industrial Average (DJI) fell 13.47 points, or 0.05%, to 26,348.78, the S&P 500 (SPX) lost 3.53 points, or 0.12%, to 2,921.05 and the Nasdaq Composite (IXIC) dropped 32.82 points, or 0.41%, to 7,940.58.
The United States and China had given hopeful signs on trade on Thursday as they discussed the next round of in-person negotiations in September ahead of a looming deadline for additional U.S. tariffs.
But Randy Frederick, vice president of trading and derivatives for Charles Schwab (NYSE:SCHW) in Austin, urged caution.
"Frankly, markets have been overly optimistic about trade," he said. "I would caution people to be a little careful because optimism won't last if it doesn't ultimately materialize into something substantive like an agreement, which I just have a hard time seeing it happen."
A new round of U.S. tariffs on some Chinese goods were expected to come into effect on Sunday and the technology sector (SPLRCT) was the biggest weight on the S&P with a 0.4% loss.
Ulta Beauty Inc (O:ULTA), which had been the S&P's top performing stock in Wall St's decade-old bull market, tumbled 29% after the cosmetics company cut its full-year profit forecast.
The biggest percentage gainer on the benchmark index was Campbell Soup Co (N:CPB), which jumped 5% after its quarterly profit beat estimates.
Advancing issues outnumbered declining ones on the NYSE by a 1.16-to-1 ratio; on Nasdaq, a 1.16-to-1 ratio favored decliners.
The S&P 500 posted 36 new 52-week highs and no new lows; the Nasdaq Composite recorded 35 new highs and 53 new lows.