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US stocks: Wall Street slips as trade worries dampen upbeat earnings

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[NEW YORK] US stocks ended slightly lower on Friday as escalating trade anxieties driven by US President Donald Trump's latest tariff threats against China offset a string of robust earnings led by Microsoft.

The Dow Jones Industrial Average posted its third consecutive weekly gain, while the S&P 500 also rose for a third straight week after eking out a gain for the period.

Shares of Microsoft Corp hit a record high and ended the session up 1.8 per cent on the heels of a strong second-quarter earnings beat. The company narrowed the race with Apple Inc and Amazon.com in the race to be worth US$1 trillion in market value.

Microsoft's advance provided the biggest support to the S&P 500 and the Nasdaq.

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Mr Trump said he was ready to impose tariffs on all $500 billion of Chinese imports, the latest salvo in a series of protectionist moves that have prompted retaliatory measures from US trading partners around the world.

"I think there's a divided line on the Street," said Robert Pavlik, chief investment strategist at SlateStone Wealth LLC in New York.

"One side believes that (the trade dispute) is only going to lead to a global recession, where the other side believes that the president is trying to get the other side to negotiate."

Mr Trump also repeated his criticism of planned interest rate hikes by the Federal Reserve, writing in a Twitter post that tightening US monetary policy would diminish any US trade advantage.

Long-dated US government bond yields rose on worries that the president's comments would encourage Fed Chairman Jerome Powell to slow the pace of rate hikes by the US central bank, which could increase inflationary pressure.

"The president can't control interest rates," Mr Pavlik said.

"He's not a king. So I think the Street's reaction to that is a major overreaction."

As the second-quarter reporting season picks up steam, analyst forecasts have grown rosier. Earnings for S&P 500 companies are now estimated to have grown 22 per cent in the quarter, compared with the 20.7 per cent seen on July 1, according to Thomson Reuters I/B/E/S.

So far, 87 companies of the S&P 500 have posted results, of which 83.9 per cent have beat consensus estimates.

The Dow Jones Industrial Average fell 6.38 points, or 0.03 per cent, to 25,058.12, the S&P 500 lost 2.66 points, or 0.09 per cent, to 2,801.83 and the Nasdaq Composite dropped 5.10 points, or 0.07 per cent, to 7,820.20.

Diversified manufacturer Honeywell International Inc's stock rose 3.8 per cent after its earnings beat expectations and the company raised its profit forecast.

General Electric Co dropped 4.4 per cent, the biggest drag on the S&P 500, after the conglomerate reported a smaller-than-expected drop in quarterly profit but trimmed its cash flow target.

Declining issues outnumbered advancing ones on the NYSE by a 1.12-to-one ratio; on the Nasdaq, a 1.11-to-one ratio favoured decliners.

The S&P 500 posted 21 new 52-week highs and two new lows; the Nasdaq Composite recorded 109 new highs and 38 new lows.

Volume on US exchanges was 6.00 billion shares, compared with the 6.42 billion-share average for the full session over the last 20 trading days.

REUTERS