SCOTT SIMON, HOST:
A wild week on Wall Street. The Dow Jones Industrial Average suffered its biggest one-day loss of the year on Wednesday, and the bond market sent up a recessionary warning flare. Investors made up some of their losses later in the week, though. And retailers got an early Christmas gift from President Trump, who postponed some of his new China tariffs until after the start of the holiday shopping season. NPR's Scott Horsley joins us. Scott, thanks so much for being with us.
SCOTT HORSLEY, BYLINE: Good to be with you.
SIMON: So when the stock market rebounded yesterday with the Dow up more than 300 points, does that mean forget what we were saying about that steep drop?
HORSLEY: Not completely. It was not a bad day for the Dow who's up about 1.2% on Friday. The S&P 500 is up about 1.4%, but both had fallen more than twice that far on Wednesday so we still ended down for the week. And investors really can't say they're out of the woods. People are still nervous about what they saw in the bond market this week when the yield or the payoff on long-term government debt fell below the yield on short-term debt. Historically, that has been a warning flare of a coming recession. Now, it can sometimes be a lag of several years, so even if you believe this signal doesn't mean it's going to happen right away. And we do continue to get some encouraging signs from the economy, as well. This week, we got a better than expected report on consumer spending. Shoppers were out in force in July, which is not surprising. A lot of people were working. Wages have been going up modestly. As long as the American consumer is spending money, the economy will keep chugging along. But more worrisome is what we've seen in the factory sector. We saw a report this week that had factories still in a slump. They're very susceptible to the global economy, which has been tapping the brakes. And, of course, factories have also been affected by trade tensions.
SIMON: And speaking of trade wars, President Trump blinked - right? - in the trade battle with China this week. Is that how you read it?
HORSLEY: Yeah. He delayed more than half of the latest round of tariffs, which were set to take effect on Chinese imports September 1. The president postponed tariffs on a lot of popular consumer items like cell phones and laptops and, well, some toys and clothing until the middle of December. Trump said he was doing that to avoid taxing consumers during the busy holiday shopping season. That's kind of a breakthrough because it's the first time the president has acknowledged even tacitly what economists have been saying, which is that it's Americans who are paying for these tariffs. Even though some of the consumer tariffs have been postponed, others are going to take effect September 1. And China's promising to retaliate. Now, the U.S. and China are scheduled for another round of trade talks in September, but the last few have not really yielded any progress.
SIMON: President loves to boast about the economy, obviously, when it's doing well. How's he handling this period?
HORSLEY: He does like to talk about the market when it's doing well. He thinks it's kind of a scorecard. And he used to brag about being approached by a worker, usually some hardhat or something who says, Mr. President, my wife thinks I'm an investing genius because my 401(k) is doing so well. Some of those wives may be having second thoughts now because for the last year or so, the stock market has more or less been treading water. Nevertheless, at a campaign rally in New Hampshire this week, the president was warning that retirement accounts would do worse if a Democrat were to win next November.
(SOUNDBITE OF ARCHIVED RECORDING)
PRESIDENT DONALD TRUMP: You have no choice but to vote for me because your 401(k)s - down the tubes. Everything is going to be down the tubes. So whether you love me or hate me, you got to vote for me.
HORSLEY: Takes a little chutzpah to say something like that one day after the market has suffered a 3% plunge, but that's our president. Trump did have a conversation on that volatile day, Wednesday, with some big bank CEOs to talk about the market, as well as the economy. Let's face it - the president knows his re-election could hinge on how the U.S. economy does over the next 15 months.
SIMON: NPR's chief economics correspondent Scott Horsley. Thanks so much.
HORSLEY: You're welcome.
(SOUNDBITE OF BADBADNOTGOOD SONG, "TIME MOVES SLOW") Transcript provided by NPR, Copyright NPR.