Wall Street lower on US-North Korea tensions

Author

12 August, 2017

Only utilities sector stocks eked out a gain on a day of mostly listless trading as investors kept an eye on the latest company earnings and geopolitical news.

Currently, the major averages remain in positive territory but off their best levels of the day.

S&P 500 e-minis were down 4.5 points, or 0.18 percent, with 209,543 contracts traded.

The risk-off tone triggered by the increase in tension between the U.S. and North Korea yesterday picked back up during today's USA session.

"North Korea best not make any more threats to the United States", Trump told journalists from his New Jersey gold club.

Nervous investors drove shares lower earlier in the week, after President Trump declared Tuesday that the USA would react with "fire and fury" to further nuclear provocations from North Korea.

Simmering tensions between the USA and North Korea have come back to the boil in recent days after Pyongyang disclosed plans to fire missiles over Japan to land near America's Pacific territory of Guam.

Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management, said: "While the tough talk about the potential for war (between the U.S. and North Korea) is scary, investors have heard it many times before".

A notable decline by Disney (DIS) is weighing on the Dow, with the entertainment giant slumping by 3.9% on the day.

Economic data showed USA worker productivity rose more than expected in the second quarter but the trend remained weak.

The Labor Department said its consumer price index inched up by 0.1% in July after coming in unchanged in June. Economists had expected productivity to increase by 0.7%. Sydney's S&P-ASX 200 gained 0.5 percent to 5,773.70 while Manila, Malaysia and Jakarta also rose. By the end of the day almost $1 trillion in equity had been lost globally. Lockheed Martin, Raytheon, General Dynamics and Northrop Grumman were all up, lifting the Dow Jones U.S. defense index 1.17 percent. The index is bouncing off its lowest closing level in six months.

Steel, networking, and financial stocks are also seeing notable weakness in mid-day trading, although selling pressure is somewhat subdued.

Railroad stocks have shown a strong move to the upside on the day, driving the Dow Jones Railroads Index up by 1.3%.

ETF Securities commodities strategist Nitesh Shah believes continued sabre-rattling between the two nuclear powers could take gold prices higher still. Most of the reaction is to President Trump's warning on late Wednesday and North Korea's comment about exploring the idea of hitting US territory Guam with a missile strike. The Nasdaq composite fell 45 points, or 0.7 percent, to 6,324. The mood then hit Europe, where Frankfurt's DAX dropped 1.1% and the CAC-40 in Paris fell 1.4%. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 5.5 basis points at 2.228%.


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