Fire & Fury? Dow Drops 55 Points as North Korea Fears Sink Stocks

Pauline Gross
Августа 13, 2017

President Donald Trump told North Korea on Friday that the US military was "locked and loaded", while Pyongyang accused him of driving the Korean peninsula to the brink of nuclear war.

Wall Street declined on Thursday, with the S&P 500 registering its first daily drop of more than 1% in nearly three months, as investors grew cautious over escalating tensions between the United States and North Korea.

More than 430 stocks from all USA exchanges hit their lowest levels in 52 weeks or more on Thursday, the most for any session since mid-November right after Trump was elected. The index had its biggest drop since mid-May a day earlier.

The Dow Jones industrial average closed up 14 points, a gain of 0.07 percent, the Nasdaq composite rose almost 40 points or 0.64 percent and the S&P 500 gained 3 points or 0.13 percent. On the mainland, the Shanghai Composite declined 0.68% and the Shenzhen Composite shed 0.52%.

The Russian dollar-traded index RTS was down 1.49 percent, and ruble-traded MICEX fell 1.29 percent by midday.

"The issue of North Korean risk is not just a matter for us - it has actually become a global risk", said Jung Sung Han, a fund manager at Shinhan BNP Paribas Asset Management Co.in Seoul.

Tensions between the USA and North Korea continued to simmer early Friday. "North Korea responding with a threat to US territory after Trump warned them not to threaten the USA was never going to go down well", Lawler said.

North Korea had responded to Trump's previous promise to unleash "fire and fury" with a threat to land a missile near the U.S. Pacific territory of Guam.

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Additionally, China weighed in on the standoff, saying in an editorial in state-run Global Times (http://www.globaltimes.cn/content/1060791.shtml) that Beijing will intervene if the USA strikes first against North Korea.

There were fewer signs of anxiousness in the markets Friday.

So far the measured decline in global stocks suggests investors buy that scenario. It's still the highest it's been since May.

Later on Friday, the US will release inflation data for the month of July. The Federal Reserve, which raised its key interest rate in March and June, has signaled it plans a third rate hike before the end of this year. But some economists say the Fed may stand pat for the rest of 2017 unless inflation accelerates in coming months. They suggest the US and China, a North Korean ally, could work together to de-escalate the situation. Discovery Communications fell 70 cents, or 2.9 percent, to $23.60. Technology and health care stocks were among the big gainers. Higher interest rates can help boost banks' revenue from loans.

Retailers Wal-Mart (WMT), Home Depot (HD), Target (TGT), Staples (SPLS), and Gap (GPS) are also among the companies due to report their quarterly results next week.

Computer hardware stocks rebounded following recent weakness, with the NYSE Arca Computer Hardware Index climbing by 1.4%. The yield on the 10-year Treasury note rose to 2.22 percent from 2.20 percent late Thursday. Brent crude, used to price worldwide oils, was down 35 cents to $51.55 a barrel in London. Brent crude, used to price worldwide oils, rose 20 cents to $52.10 a barrel in London. Natural gas was also flat at $2.98 per 1,000 cubic feet. Viacom slid 60 cents, or 1.9 percent, to $30.17. Silver gained 1 cent to $17.07 an ounce. Apple was down 2.3 percent, weighing most on the index.

Major indexes in Europe closed mostly lower. Germany's DAX was up 0.1 percent, while France's CAC 40 fell 1.1 percent.

The FTSE 100 index slumped 1.1% to 7,309.96, the lowest close since May 8, FactSet data showed. The index is bouncing off its lowest closing level in six months. In Australia, the S&P/ASX 200 was down 1.13%. Major indexes in Asia closed lower.

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