Wall Street opens lower as missile test jolts investors
Investors pouring into exchange-traded products
The Dow fell more than 100 points at the open yesterday as North Korea’s missile test over Japan prompted President Donald Trump to warn that “all options are on the table”, triggering a flight to safety among investors. The missile, tested early yesterday, flew over Japan and landed in the Pacific about 735 miles off the northern region of Hokkaido, a rare occasion when North Korea fired projectiles over mainland Japan.
“Threatening and destabilizing actions only increase the North Korean regime’s isolation in the region and among all nations of the world. All options are on the table,” Trump said in a statement.
Earlier this month, North Korea threatened to fire four missiles into the sea near the US Pacific territory of Guam after Trump warned that the reclusive country would face “fire and fury” if it threatened the United States. “It is a risk-off mode and ... investors are either staying on the sidelines for this dust to settle or booking their gains,” said Naeem Aslam, chief market analyst at Think Markets UK. Investors scampered to safehaven assets, with gold jumping to its highest since November and the benchmark US 10-year treasury yield dipping to its lowest since the day after the Nov. 8 US presidential election. The news also jolted the CBOE Volatility index, which rose 1.95 points to 13.27.
Investors have been pouring into exchangetraded products (ETPs) linked to Vix, particularly and, that were up about 11 percent in heavy volumes. iShares MSCI Emerging Markets ETF was down nearly 1 percent. The S&P and the Dow ended little changed on Monday, with energy and bank shares lower as Tropical Storm Harvey crippled the US energy hub in Texas.
“The effects of Hurricane Harvey are still going to remain prominent as the flooding continues. It is going to have some serious economic impact and just how large that would be is still unclear,” Aslam said. The Dow Jones Industrial Average was down 100.14 points, or 0.46 percent, at 21,708.26, the S&P 500 was down 11.43 points, or 0.46 percent, at 2,432.81.
The Nasdaq Composite was down 35.69 points, or 0.57 percent, at 6,247.33. Nine of the 11 major S&P sectors were lower, with the financial index’s 1.08 percent loss leading the decliners. US-listed shares of gold miners rose, with Kinross Gold rising 2.5 percent and Harmony Gold gaining about 5 percent. Defense stocks rose. Northrop Grumman, Raytheon , Lockheed Martin and General Dynamics were all up about 0.7 percent. Dow component Nike fell 2.33 per- cent after Morgan Stanley cut its price target by $4 to $64. Finish Line plunged about 29 percent after the sporting goods retailer cut its full-year profit forecast and adopted a poison pill.
Best Buy was down 6.33 percent after the No 1 US consumer electronics retailer warned that its strong quarterly same-store sales performance should not be seen as a “new normal”.
The price of gold climbed $11.40 to $1,326.70, its highest price in almost a year. Bond prices jumped and yields sank. The yield on the 10-year Treasury note fell to 2.11 percent from 2.16 percent.
The dollar fell, with the ICE US dollar Index reaching to its lowest level in two-and-a-half years. The dollar slid to 108.74 yen from 109.09 and compared to the euro $1.2023 from $1.1979. The European currency is at its highest level in more than two years, as European Central Bank leaders do not seem poised to take action about its strength. Finish Line forecast weak second-quarter results and the retailer cut its forecasts for the rest of the year. It said discounts on shoes are growing, which is hurting its profit margins. Its stock tumbled $2.68, or 25.8 percent, to $7.74. It was just the latest in a series of discouraging reports from sporting goods companies this month. Under Armour lost 65 cents, or 3.8 percent, to $16.28 and Foot Locker shed 56 cents, or 1.6 percent, to $35.14. Nike lost $1.48, or 2.8 percent, to 52.25.
Finish Line and Foot Locker have both fallen more than 50 percent this year and Under Armour is down more than 40 percent. Electronics retailer Best Buy had a solid second quarter and raised its forecasts for the year, but it wasn’t enough to send the stock higher. Its shares fell $5.88, or 9.4 percent, to $56.59. Despite that loss, the stock is up 33 percent in 2017 and it’s been setting all-time highs.
Shrinking board
Consulting company Advisory Board is climbing after it confirmed recent rumors that it’s selling its health care business to UnitedHealth’s Optum unit and its education business to Vista Equity Partners. The company said it expects $2.58 billion in proceeds after taxes. Advisory Board gained $3.13, or 6.3 percent, to $52.98. France’s CAC 40 fell 1.1 percent and Germany’s DAX slid 1.7 percent. The FTSE 100 index in Britain lost 1 percent. Asian indexes had a smaller reaction. In Japan, the benchmark Nikkei 225 slid 0.5 percent and South Korea’s Kospi lost 0.2 percent. In Hong Kong, the Hang Seng shed 0.1 percent.