Wall St. eases as geopolitical risks weigh on sentiment

By Caroline Valetkevitch

(Reuters) - U.S. stocks eased Tuesday afternoon as mounting geopolitical tensions drove investors out of riskier assets.

With about an hour left to the session, the S&P 500 was off its lowest levels of the day, though.

The Syrian Observatory for Human Rights said Syrian government warplanes dropped barrel bombs on rebel-held areas of Hama province on Tuesday, a day after the United States said their use could lead to further U.S. strikes in Syria.

Trump ordered a missile strike on the war-torn country last week as a response to a poison gas attack that his administration blamed on government forces, pitting the United States against Russia, which backs Syrian President Bashar-al-Assad.

 

Adding to the dour mood, North Korea state media warned of a nuclear attack on the United States if provoked as a U.S. Navy strike group moved towards the western Pacific.

Investors also braced for earnings season, which begins this week with results due from a handful of banks. The financial sector <.SPSY>, down 0.5 percent, was the biggest loser.

"While waiting for earnings, you start to read some of the geopolitical stuff and tensions are moving up a bit," said Mark Kepner, managing director, sales and trading, at Themis Trading in Chatham, New Jersey.

The CBOE Volatility index <.VIX>, also called Wall Street's "fear gauge", shot up to its highest level in five months, while prices of spot gold > jumped to their highest since November. Demand for U.S. Treasuries and the Japanese yen also rose.

The Dow Jones Industrial Average <.DJI> was down 22.53 points, or 0.11 percent, to 20,635.49, the S&P 500 <.SPX> had lost 6.07 points, or 0.26 percent, to 2,351.09 and the Nasdaq Composite <.IXIC> had dropped 23.20 points, or 0.39 percent, to 5,857.73.

Trump's comments during a meeting with chief executives of U.S. companies helped the market recoup some losses.

Trump said his administration was working to reduce regulations and revamp the Dodd-Frank Wall Street reform law, which may be eliminated and replaced with "something else."

The tailwinds for the market are fundamentals and the hope of pro-growth policy, while the negatives are the unpredictability of geopolitical risks, said Art Hogan, chief market strategist at Wunderlich Equity Capital Markets in New York.

Shares of United Continental dropped 2.6 percent after a worldwide backlash erupted against the carrier over a passenger who was dragged off one of its overbooked U.S. flights.

Thursday will be the last trading day of the week on Wall Street ahead of the Good Friday holiday.

Advancing issues outnumbered declining ones on the NYSE by a 1.47-to-1 ratio

The S&P 500 posted 5 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 54 new highs and 41 new lows.

(Additional reporting by Yashaswini Swamynathan in Bengaluru; Editing by Chizu Nomiyama)