The S&P 500 and Dow have slipped as investors were nervous ahead of a US response to China’s national security law on Hong Kong that threatens to take the shine off another month of strong gains for the stock market.

US President Donald Trump, who has warned of a tough response to China’s move, is expected to make an announcement later in the day.

“Tensions between the world’s two largest economies are as high as they’ve been in memory, higher than last year’s trade war that was economically focused,” Cantor Fitzgerald analyst Sachin Raghavan said.

Adding to the downbeat mood, economic data showed US consumer spending dropped by a record in April as the COVID-19 pandemic undercut demand, buttressing expectations that the economy could contract in the second quarter at its steepest pace since the Great Depression.

Financial stocks, the best performing S&P sector this week, were the biggest drag on the benchmark index.

Still, Wall Street’s main indexes were set to end May with a second straight month of gains on hopes of a return to economic normality after a coronavirus-led slump.

In early trading, the Dow Jones Industrial Average was down 65.18 points, or 0.26 per cent, at 25,335.46, and the S&P 500 was down 2.31 points, or 0.08 per cent, at 3,027.42.

But the Nasdaq Composite was up 45.26 points, or 0.48 per cent, at 9,414.25, with technology-focused firms Microsoft Corp, Facebook Inc, Inc and Netflix Inc being a bright spot.

A day after Trump signed the order threatening social media firms with new regulations over free speech, Twitter hid a tweet from the president and accused him of breaking its rules by “glorifying violence”.

Twitter shares were down 2.8 per cent.

Focus is also on Federal Reserve Chair Jerome Powell who will speak on Friday in a public webcast, where he is expected to detail the central bank’s next phase of coronavirus response. Inc slipped 4.8 per cent as the cloud-based business software maker cut its annual revenue and profit forecasts.

Declining issues outnumbered advancers nearly 2-to-1 on the NYSE and 1.43-to-1 on the Nasdaq.

The S&P index recorded four new 52-week highs and no new low, while the Nasdaq recorded 23 new highs and four new lows.

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