NEW YORK (Reuters) – Wall Street languished near the starting gate in mid-afternoon trading on Monday as investor hopes over U.S.-China trade talks were muted by concerns about possible congressional gridlock and a diminished 2019 earnings outlook.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., February 8, 2019. REUTERS/Brendan McDermid/Files

The S&P 500 (.SPX> and the Nasdaq were essentially flat while the blue chip Dow edged lower.

Both Beijing and Washington expressed optimism about trade negotiations between the world’s two largest economies, even as a U.S. Navy mission in the disputed South China Sea provoked China’s anger.

In Washington, congressional leaders attempted to reach an agreement on border security funding in a bid to avert another government shutdown.

With two-thirds of S&P 500 companies having reported, the fourth-quarter earnings season approached the home stretch. So far, 71.2 percent have posted better-than-expected profits.

Analysts see fourth-quarter earnings growth of 16.5 percent, up from 15.8 percent at the beginning of the year.

But first-quarter profits are expected to be down 0.2 percent, which would mark the first contraction since the second quarter of 2016.

“Slower growth is a concern,” said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama. “It’s not something that’s making investors run out and sell but it’s keeping some buyers on the sidelines.”

“The first quarter earnings estimates have come down and that brings up fears of potential earnings recession,” Hellwig added.

The Dow Jones Industrial Average fell 67.22 points, or 0.27 percent, to 25,039.11, the S&P 500 lost 0.82 points, or 0.03 percent, to 2,707.06 and the Nasdaq Composite added 2.53 points, or 0.03 percent, to 7,300.73.

Losses on Monday were concentrated. Of the 11 major S&P sectors, only communications services, utilities and healthcare were in the red.

Tariff-sensitive industrial stocks provided the biggest lift the S&P 500, led by General Electric Co, FedEx Corp and Caterpillar Inc, among others.

Gains were held back by healthcare stocks, which fell 0.3 percent. The sector was the biggest drag on the Dow, pulled down by UnitedHealth Group Inc and Pfizer Inc and Merck & Co, each down more than 1 percent.

Shares of Tesla Inc rose 2.7 percent after Cannacord Genuity upgraded the stock to “buy” from “hold.” It said the electric automaker’s recent price cuts are helping achieve its goal of an affordable Model 3.

Electronic Arts Inc extended its rally, gaining 2.0 percent after the gamemaker said its Apex Legends attracted more than 10 million players.

Apple Inc edged 0.3 percent lower after industry research firm IDC said in a report that iPhone sales in China fell by 20 percent in the fourth quarter.

Advancing issues outnumbered declining ones on the NYSE by a 1.66-to-1 ratio; on Nasdaq, a 1.53-to-1 ratio favoured advancers.

The S&P 500 posted 31 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 57 new highs and 16 new lows.

Reporting by Stephen Culp; Editing by Jeffrey Benkoe


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