North Korea Tensions Hit Global Stock Markets

Frederick Owens
August 12, 2017

US stocks fell sharply on Thursday, with the Dow slipping more than 100 points, as lackluster results from retailers Macy's and Kohl's added to investor nervousness over escalating tensions between the United States and North Korea.

"I think the market was looking for a reason to come off here", said Irwin Michael, portfolio manager at ABC Funds.

Investors took protection in traditional safe haven assets and put option positions. Secretary of state Rex Tillerson said yesterday North Korea posed no "immediate threat" and that "Americans should sleep well at night, have no concerns about this particular rhetoric of the last few days".

"You'd need to see something more tangible than just rhetoric for a broader pullback", said Richard Steinberg, managing director at HSW Advisors, a finance team within HighTower Advisors, in NY.

J.C. Penney slumped 24.4 percent to a record low after the retailer reported a bigger-than-expected quarterly loss.

The Dow Jones Industrial Average fell 36.64 points, or 0.17 percent, to end at 22,048.7, the S&P 500 lost 0.9 point, or 0.04 percent, to 2,474.02 and the Nasdaq Composite dropped 18.13 points, or 0.28 percent, to 6,352.33. Its shares slid $9.77, or 5.3 percent, to $174.02. The Swiss franc and the Japanese yen also rose.

The remarks followed a new report asserting that USA intelligence has assessed that Pyongyang has successfully produced a nuclear warhead that can fit inside its missiles. It was the benchmark's worst percentage drop since a 1.8 % decline on that same day in May. The CBOE Volatility Index (VIX) soared more than 40% to trade at 15.98.

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Ten out of the 11 major S&P 500 sectors ended lower after the comments with the only gains seen in the utilities sector, which is seen as a bond proxy because of its slow but predictable growth and dividends. Money also flowed into consumer discretionary stocks.

Disney dropped 3.9 percent after reporting a weak quarter and saying it would pull its movies from Netflix and start its own video streaming services.

Travel website operator Priceline Group Inc fell 6.9 percent after a disappointing financial forecast.

S&P 500 e-minis were up 1.5 points, or 0.06 percent, with 300,073 contracts traded.

NYSE declining issues outnumbered advancers 1.73-to-1; on Nasdaq, a 1.47-to-1 ratio favoured decliners.

Markets had seen a tentative recovery in risk appetite in US and early Asian trading, but as the war of words resumed Asian stocks dropped back and London, Frankfurt and Paris all lost 0.5-1.2 per cent.

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