Tensions with North Korea weigh over sentiment
U.S. stocks closed firmly lower on Tuesday, 05 September 2017 with the S&P 500 snapping a six-day winning streak, as investors focused on heightened tensions between the West and North Korea and worries about a lack of progress on President Donald Trump's pro-growth agenda. Low trading volume, particularly as investors returned from a holiday-lengthened Labor Day weekend, added to the downbeat tone on Wall Street.
After four straight days of gains, the Dow Jones Industrial Average fell 234.25 points, or 1.1%, to finish at 21,753.31. The S&P 500 shed 18.70 points, or 0.8%, to close at 2,457.85, with eight of the large-cap index's sectors ending in the red. The Nasdaq Composite Index declined 59.76 points, or 0.9%, to close at 6,375.57.
The trigger for Tuesday's bearish bias was North Korea's nuclear test over the weekend, yet it quickly morphed into more than that as the media intensified its coverage of Hurricane Irma, which was upgraded to a category 5 storm that is tracking toward the Caribbean and could very well hit the continental U.S., namely Florida, by the weekend or early next week.
The standoff between North Korea and the U.S. and its allies escalated over the weekend after Pyongyang said it had successfully tested its largest-ever nuclear bomb.
Shares of United Technologies Corpsank 5.7% after the industrial conglomerate said late Monday it had reached a deal to buy airplane-parts makerR ockwell Collins for $23 billion, in the biggest aerospace deal in history.
On Tuesday, the ICE U.S. Dollar Index edged down by 0.3%. Commodities priced in greenbacks is more attractive to investors using another currency. U.S. equities also traded broadly lower, feeding further investment demand for dollar denominated commodities.
As the interest-rate watch continues for the currency and metal markets, Federal Reserve Governor Lael Brainard said Tuesday that the Fed may have to slow down the pace of interest-rate hikes given the recent low readings for inflation.
The lone economic reporyt of the day was the Factory Orders report for July. It showed orders fell 3.3% in July (consensus -3.2%) on the back of weakness in transportation equipment orders. The report was quickly glossed over by traders, though, since it was largely in-line with expectations.
Bullion prices ended higher at Conmex on Tuesday, 05 September 2017. Gold rallied on Tuesday, as nervousness over North Korea's weekend nuclear display, weakness in the dollar and broad losses in U.S. equities combined to push futures to the highest close in nearly a year.
Gold for December delivery rose $14.10, or 1.1%, to settle at $1,344.50 an ounce, the highest close since Sept. 22, 2017. The strong gain for what's considered a haven investment came after North Korea on Sunday conducted a sixth and significantly larger hydrogen bomb test than seen before, hailing it as a perfect success. Silver for December added 12.5 cents, or 0.7%, to $17.941 an ounce.
U.S. oil prices saw on their highest finish in three weeks on Tuesday, 05 September 2017 while gasoline prices dropped by nearly 3% as Gulf Coast refineries powered back up after the disruptions caused by Hurricane Harvey last week.
October West Texas Intermediate crude oil advanced $1.37, or 2.9%, to settle at $48.66 a barrel. November Brent oil rose $1.04, or 2%, to $53.38 a barreltopping the $53 level for the first time since May. The global benchmark last week widened its spread against, as Harvey reduced demand for U.S. oil and was seen as increasing the need for imported oil.
Wednesday's economic calendar features the MBA Mortgage Applications Index for the week of September 2, the Trade Balance report for July (consensus -$44.6 bln), the ISM Services report for August (consensus 55.2), and the Fed's Beige Book report.
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