Markets

Stocks rise slightly, but trade and economy worries persist

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Some people are suffering from 'tariff exhaustion,' says markets strategist

Stocks rose on Thursday, regaining some of the losses from the previous session, but the market's gains were kept in check as worries over the global economy and trade lingered.

The Dow Jones Industrial Average closed 43.47 points higher at 25,169.88, led by McDonald's and Coca-Cola. The climbed 0.2% to 2,788.86 as the real estate and tech sectors outperformed. The Nasdaq Composite advanced 0.3% to 7,567.72. The major indexes had closed lower on Wednesday, with the Dow losing more than 200 points. 

Shares of software company Keysight Technologies led the tech sector higher, rising 11.3% on stronger-than-expected earnings. 

Stock benchmarks briefly turned negative in afternoon trading, around the same time the 10-year Treasury yield gave back its earlier gains. The yield fell to 2.227%, near 20-month lows. The 10-year yield entered May trading above 2.5%.

Plunging yields this month, along with a yield curve inversion, have raised concerns about slowing economic growth. Investors typically see bonds as a safer alternative to riskier assets when economic worries arise.

"It definitely points to slower growth. That's the primary driver right now in this risk-off environment we've experienced in the month of May," said Ryan Nauman, market strategist at Informa Financial Intelligence, about the drop in yields. "People are rotating out of equities and into Treasurys for that defensive play."

Bank shares followed yields lower. The SPDR KS&P Bank ETF (KBE) dropped 1.5% as Bank of America shares lost 2.1%. J.P. Morgan Chase also declined 1.1%.

The S&P 500 is down more than 5% this month and remains below 2,800 — a key level watched by traders — for the first time since late March.

There are "insufficient signs of bottoming" in the market, said Mark Newton, managing member at Newton Advisors, in a note. "Yet this will all take time. Until then, downside targets should take another 3-5 trading days with the 2722-35 [range] having significance for S&P. Closes back up above 2800, however, would be something to watch carefully."

The protracted trade dispute between China and the U.S. also weighed on markets. A senior Chinese diplomat ramped up the rhetoric overnight. Also, China has halted soy purchases from the U.S., according to Bloomberg News.

Financial professionals work on the floor of the New York Stock Exchange (NYSE)
Drew Angerer | Getty Images

Chinese Vice Foreign Minister Zhang Hanhui said Thursday that provoking trade disputes amounted to "naked economic terrorism."

Washington and Beijing have imposed tariffs on billions of dollars' worth of one another's goods since the start of 2018, battering financial markets. Earlier this month, both countries ratcheted up tensions through higher tariffs.

The higher levies pressured U.S. stocks in May, putting them on pace for their first monthly decline of 2019.

In economic news, the second read on first-quarter U.S. GDP showed the economy expanded by 3.1% on an annualized basis. The 3.1% print topped a Dow Jones estimate of 3%.

—CNBC's Sam Meredith contributed to this report.