Major US stock indices fell significantly, as investor optimism about the upcoming trade negotiations between the US and China faded.

The Chinese newspaper South China Morning Post (SCMP) reported that the Chinese authorities have weakened their hopes of resolving a trade dispute ahead of negotiations with the United States. The publication notes that Chinese Deputy Prime Minister Liu He, who will lead the country's trade delegation, will not have the title of “special envoy,” which means that he did not receive any specific instructions from Chinese President Xi Jinping. Moreover, according to SCMP, the Chinese delegation may return home from negotiations one day earlier than planned. Summit trade talks between US and China should begin on Thursday. However, another Global Times publication in China said that China “sincerely” hopes to close a deal with the United States.

A negative reaction was also caused by the message that the US government has expanded its trade "black list" to include several leading Chinese companies specializing in artificial intelligence technologies, punishing Beijing for discrimination against predominantly Muslim ethnic minorities. Investors fear that China may react sharply to this decision, which could hurt the chances of a breakthrough in negotiations later this week. In addition, Bloomberg reported that the White House is seeking to limit US state pension fund investments in Chinese stocks.

Market participants also analyzed data on producer prices for September. According to a report by the US Department of Labor, producer price index (PPI) for final demand in September fell 0.3% after rising 0.1% in August. Over the 12 months to September, PPI grew by 1.4%, which is the smallest increase since November 2016, after rising by 1.8% in August. Economists predicted that PPI would rise by 0.1% in September and increase by 1.8% year on year. At the same time, excluding the volatile components of food, energy and trade services, producer prices did not change last month after a jump of 0.4% in August. The so-called basic PPI rose 1.7% in the 12 months to September after rising 1.9% in August.

Almost all DOW components completed trading in the red (29 of 30). Outsiders were shares of Cisco Systems (CSCO; -2.90%). Only shares of Walmart Inc. went up (WMT; + 0.31%).

All S&P sectors recorded a decline. The largest decline was shown by the technology sector (-1.7%).

At the time of closing:

Dow 26,164.04 -313.98 -1.19%

S&P 500 2,893.06 -45.73 -1.56%

Nasdaq 100 7,823.78 -132.52 -1.67%