(Reuters) – The S&P 500 and the Dow Jones indexes fell on Friday, but were well off their session lows, amid signs of deteriorating Sino-U.S. trade relations and growing evidence of the economic slump due to the coronavirus pandemic.

FILE PHOTO: The New York Stock Exchange (NYSE) is seen in the financial district of lower Manhattan during the outbreak of the coronavirus disease (COVID-19) in New York City, U.S., April 26, 2020. REUTERS/Jeenah Moon

However, the small-cap Russell 2000 rose 1.2% as shares of Sorrento Therapeutics Inc (SRNE.O) more than doubled after the drug developer said its experimental antibody candidate showed potential in blocking COVID-19 infections in pre-clinical studies.

Healthcare stocks were the biggest boost to the Nasdaq .IXIC with Sorrento topping percentage gainers on the index.

“Small cap indexes are probably going to rally given that maybe a COVID-19 cure isn’t going to come from a S&P 500 company, maybe it’s going to come from a smaller biogen lab,” said John Brady, senior vice president at R.J. O’Brien & Associates in Chicago.

Brady added that news of the potential treatment was also helping some underlying strength in the markets.

President Donald Trump said on Friday the U.S. government would invest in all the top coronavirus vaccine candidates and said a list had been narrowed to 14 promising possibilities with a plan to narrow further.

Earlier in the day, the S&P 500 fell as much as 1.3% as the Trump administration’s move to block semiconductor shipments to China’s Huawei Technologies [HWT.UL] from global chipmakers, ratcheted up trade tensions between the two countries.

China was swift to respond with a report saying it was ready to put U.S. companies on an “unreliable entity list,” according to the Global Times.

China’s countermeasures include launching investigations and imposing restrictions on U.S. companies such as Apple Inc (AAPL.O), Cisco Systems Inc (CSCO.O), Qualcomm Inc (QCOM.O), as well as suspending purchase of Boeing Co (BA.N) airplanes, the report said, citing a source.

Boeing fell 1.6% and Apple was down 1.2%. The trade-sensitive Philadelphia chip index .SOX slumped about 2.5%.

“There’s talk that the trade deal that we signed in January, the U.S. could walk away from that,” said Ryan Detrick, senior market strategist for LPL Financial.

“While we don’t think that’s the base case, what could potentially happen is that rhetoric keeps up, and stocks don’t like that.”

After a strong rally from 2020 lows, the three major stock indexes are on course for their worst week since mid-March, as sobering comments on the pandemic from major U.S. officials pointed to a longer period of economic weakness.

Meanwhile, economic data continued to paint a grim picture with the latest batch of reports indicating U.S. retail sales and manufacturing output endured record declines in April as the virus-led slump seeped into the second quarter.

At 1:18 p.m. ET, the Dow Jones Industrial Average .DJI was down 53.89 points, or 0.23%, at 23,571.45, the S&P 500 .SPX was down 3.42 points, or 0.12%, at 2,849.08. The Nasdaq Composite .IXIC was up 23.06 points, or 0.26%, at 8,966.78.

Six of the 11 major S&P sectors were higher, led by a 0.9% gain in consumer staples .SPLRCS.

Advancing issues outnumbered decliners for a 1.11-to-1 ratio on the NYSE and a 1.40-to-1 ratio on the Nasdaq.

The S&P index recorded six new 52-week highs and no new low, while the Nasdaq recorded 42 new highs and 15 new lows.

Reporting by Ambar Warrick and Medha Singh in Bengaluru; Editing by Shounak Dasgupta

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