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14 August 2017, 02:28 | Jan Cross
Fire & Fury? Dow Drops 55 Points as North Korea Fears Sink Stocks
Geopolitical concerns continue to weigh on Wall Street amid an ongoing escalation in tensions between the USA and North Korea.
The negative headlines provided many investors with an opportunity to pocket some of their recent gains following a string of record highs fueled by strong corporate earnings.
"Since these are the stocks that have been in the spotlight the most, they tend to have the most volatility upwards and downwards", said Chris Bertelsen, chief investment officer of Aviance Capital Management in Sarasota, Florida. "That did temporarily shake investors' complacency, but we think markets are ready to move higher in the back half of the year, and earnings and economic data are going to drive that".
The dollar index fell 0.39 percent, with the euro up 0.48 percent to $1.1827. The Dow Jones industrial average slid 36.64 points, or 0.2 percent, to 22,048.70. But some investors welcomed the dip in the sector, which has been S&P's leading gainer so far this year. The S&P 500 is up 9 percent, while the Dow is up 10.6 percent.
However, an Associated Press report that the USA and North Korea have been engaged in back channel talks (https://apnews.com/686ac7c761694b28b67793a1d8297145?link=mktw) for several months even as they exchange incendiary threats helped to soothe some of the jitters.
Buying interest is somewhat subdued, however, as the ever-escalating war of words between President Donald Trump and North Korea continues to raise geopolitical concerns.
Friday caps a week dogged by escalating tension between the USA and North Korea which culminated with President Donald Trump stating that his earlier threat to unleash "fire and fury" on North Korea "maybe wasn't tough enough".
The focus on North Korea has largely overshadowed a Labor Department report showing an unexpected drop in USA producer prices in the month of July.
Still, there were fewer signs of anxiousness in the markets Friday. Ten-year yields were around 2.25 percent earlier in the week. It's still the highest it's been since May.
The latest United States economic data cemented expectations that inflation will remain subdued amid a robust labour market.
In other news, U.S. 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. Core prices had been expected to rise by 0.2 percent.
Phipps said investors were reassured after Dallas Fed President Rob Kaplan's said on Friday that the Fed needs more evidence of progress toward its inflation goal before raising rates again. They suggest the US and China, a North Korean ally, could work together to de-escalate the situation.
Technology companies, which suffered the brunt of the selling a day earlier, were back in the lead Friday. Netflix was down 3.22 percent. Biotech companies Celgene and Amgen lost 3.8 percent and 2.6 percent, respectively. Humana rose $4.74, or 1.9 percent, to $254.96.
SLIDING: Traders sold-off utilities stocks.
Silver gained 47 cents, or 2.9 percent, to $16.86 an ounce. The company also said sales at its established stores declined for the fourth straight quarter.
The benchmark US yield on Thursday was just above 2.2 percent, at its lowest level since late June, as investors bought up Treasuries, a classic safe harbor.
Benchmark U.S. crude added 39 cents to settle at $49.56 a barrel on the New York Mercantile Exchange.
USA crude rose 0.41 percent to $48.79 per barrel and Brent was last at $52.01, up 0.21 percent. Netflix was down 1.8 per cent. Travel-review website operator TripAdvisor was down 2.7 per cent.
In Asia, several indexes closed lower overnight.
Yesterday China's Hang Seng and SSE Composite indices fell by 1.9 per... The Kospi 200 volatility index jumped as much as 27 percent.
The major European markets are also seeing continued weakness on the day.
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