Dow plummets 205pts as Trump inflames Korea tension

Dow plummets 205pts as Trump inflames Korea tension

The S&P 500 index was down 18.45 points to 2,455.57 and the Nasdaq composite index was down 68.32 points to 6,284.01. Hours later, North Korea said it was considering launching missiles at Guam. The Dow Jones Industrial Average fell 0.17% and closed at 22,048.70.

Frankfurt's DAX 30 was also down, shedding 0.1 per cent at 12,142.62 points. Lockheed Martin, Raytheon, General Dynamics and Northrop Grumman all rose and the Dow Jones U.S. defense index was up 1.6 percent after hitting a record high.

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.

Tillerson's tone was in sharp contrast to that of United States president Donald Trump, who warned on Tuesday any North Korean threat to the U.S. would be met with "fire and fury". 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.

Politics lifted USA defense stocks.

"Risk assets remain out of favour, as the threat of a conflict with North Korea pushes traders towards havens", said Joshua Mahony, market analyst at IG. In a tense situation like this, equity markets can move lower exceptionally fast, and investors don't want to be caught on the wrong side of the markets, so they are getting out now'.

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The slide deepened after Trump's remarks on North Korea aired.

The CBOE Volatility Index, a barometer of expected near-term stock market volatility, closed at its highest since the USA presidential election on Thursday, but was down 1.22 points at 14.82 points on Friday.

Shares of Kohl's Corporation surged 7% in premarket trading Thursday before giving up those gains, after the retailer reported earnings that beat Wall Street estimates.

Macy's dropped 4.2 percent as it reported second-quarter revenues fell 5.4 percent to $5.6 billion, another sign of the travails facing department stores. S&P 500 futures slipped 0.3 percent, after dropping the most since May yesterday, while the yield on 10-year Treasuries dropped below 2.2 percent.

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.

Right now, we're going to treat the current selling as a much needed short-term correction. Economists had expected another 0.1 percent uptick. Core prices had been expected to rise by 0.2%.

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