Equities fall on rising tension between US & North Korea

Judith Bessette
Agosto 13, 2017

Brewing tensions between the USA and North Korea put investors in a selling mood again Thursday, dragging US stocks lower for the third day in a row.

In overseas trading, stock markets across the Asia-Pacific region saw continued weakness during trading on Friday.

Mr. Trump's remarks on Tuesday that North Korea would face "fire and fury like the world has never seen" pushed Wall Street lower on Tuesday and drove up the VIX "fear gauge" of expected volatility on the S&P 500 higher.

In his latest warning to North Korea, US President Donald Trump said on Friday military solutions were "fully in place" and referred to American weapons as being "locked and loaded" should the nuclear-armed nation act "unwisely".

"There was some skittishness earlier but then some buyers stepped in", he said.

The Nasdaq Composite dropped 49.53 points, or 0.78 per cent, to 6,320.93.

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

After a dip of as much as 0.52 per cent earlier in the day, Wall Street's three major indexes bounced off intraday lows. It fell 1.43 percent for the week, the most since the week of March 24. It has been more than a year since the last 5% downdraft in stocks and more than 76 weeks since the stock market suffered a 10% loss.

"From a geopolitical perspective, we understand why the escalation in tensions will have shaken some of the complacency out of investors", said Eric Wiegand, senior portfolio manager at U.S. Bank Private Client Wealth Management.

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The S&P 500 volatility index jumped again on the latest jawboning in the US-North Korea standoff.

Instead, investors turned to assets that tend to benefit in times of geopolitical and financial stress.

Macy's shares closed down 10.2 percent and Kohl's fell nearly 6 percent as the companies continued to report a drop in quarterly same-store sales, stoking concerns that their turnarounds may still be a long way off. Its shares tumbled $11.35 to $61.99.

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.

Overall it has been a strong stretch for corporate profits.

In other news, United States wholesale inflation dropped in July, the first contraction in almost a year and another data point that could weaken the case for the Federal Reserve to raise the benchmark interest rate again later this year. For the week, the benchmark slipped 2.6%. Yields fall when bond prices rise.

The Labour Department said that its Consumer Price Index inched up 0.1% last month, pointing to subdued inflation which could make Federal Reserve policy makers cautious regarding another interest rate hike in 2017.

Friday's report was the latest in a string of lackluster inflation readings, which have surprised many investors who had entered the year betting on an upsurge in economic growth and inflation.

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