US stocks slip amid heightened US-North Korea tensions

Marco Green
August 13, 2017

Hope that the Fed will have to slow its rate hike path appeared to stop, at least for now, the near $1-trillion loss in world stocks valuations this week triggered by the war of words between Pyongyang and the United States.

"The slight bias to the upside (in stocks) is a result of the CPI number".

"It is a market that is beginning to encounter some major threats and of course the threat is geopolitical", said Peter Cardillo, chief market economist at First Standard Financial.

The data comes amid tepid inflation that has remained below the Federal Reserve's 2 percent target, despite low unemployment.

U.S. stocks have risen week after week this year - with the S&P up more than 9 percent - in extremely low volatility, as strong corporate earnings and an improving global economy offset disappointment that U.S. President Donald Trump's promises to lower corporate taxes and implement a massive infrastructure spending have so far failed to see the light of day.

President Donald Trump warned North Korea of "fire and fury" this week in response to recent threats from Pyongyang, which said it was examining plans for attacking Guam, a US territory in the Pacific with a military base.

About 7.5 billion shares changed hands on US exchanges, well above the 6.25 billion average for the last 20 days. "You're less than 2 percent off the high for the S&P heading into a weekend where uncertainty with North Korea still lingers".

The broad-based S&P 500 fell less than 0.1 percent at end at 2,474.02, while the tech-rich Nasdaq Composite Index dropped 0.3 percent to 6,352.33.

The Dow Jones Industrial Average dropped 204.69 (nearly one percent), closing the session at 21,844.01. The Nasdaq lost 135 points, or 2.1 percent, to 6,216. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 1.47 percent lower.

"Pretty remarkable, perhaps even extraordinary, considering", said Tim Ash, strategist at fund manager BlueBay.

The S&P 500 volatility index, a measure of investor fear, rose for a second day.

Most large-cap stocks fell across the board.

The CBOE Volatility Index (VIX - 11.11) gained 0.2 point, or 1.4%.

Amid the hot rhetoric, USA stocks sold off sharply on Thursday, with the S&P 500 falling more than 1 percent.

Investors also drew some encouragement from new government data showing USA inflation at the consumer level inched higher last month.

"If the data continues to come in on the softer side, the market might start to price the Fed staying on hold this year", said Sireen Harajli, FX strategist at Mizuho in NY.

London's FTSE 100 dipped by about 90 points, or more than 1%, in morning trading on Friday, adding to a slump of more than 100 points the day before and taking it to its lowest level since May.

Smaller-company stocks also fell sharply.

Benchmark 10-year notes last rose 5/32 in price to yield 2.194 percent, from 2.211 percent late on Thursday. Oil prices were headed higher. South Korea's Kospi fell 0.5 percent.

Benchmark U.S. crude fell 97 cents, or 2 percent, to $48.59 a barrel on the New York Mercantile Exchange.

Other reports by Click Lancashire

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