S&P falls 1.4 percent in safety flight on North Korea tensions

Xavier Trudeau
Août 13, 2017

USA stocks rose Friday but still notched their biggest weekly loss in months, as investors were shaken by disappointing earnings results and an escalation of threats between the US and North Korea.

U.S. stocks deepened their losses following the latest Trump comments, and the S&P 500 volatility index, known unofficially as the "fear index", rose decisively. Late in the session, President Donald Trump said perhaps his threat to unleash "fire and fury" on North Korea "maybe wasn't tough enough". "If the answer is 'yes, ' then you better get defensive". The fall of the S&P 500 has been higher, at 1.5 %, most felt still for the Nasdaq, technology stocks losing 2.1% on the session. Major stock indexes across Europe and Asia also posted weekly declines. "This provides an excuse key in hand for investors to cash in profits, or at least to contain for the moment their fever buying in a market where many think it was ripe for a downturn", said Patrick O'hare of Briefing. Brent crude futures lost 0.8 percent to $51.5 per barrel on persistent oversupply worries despite a bigger-than-expected drawdown in US crude inventories.

"Given the great run we've had, seems like some sort of pullback wouldn't be surprising", said Michael Baele, managing director of investments at U.S. Bank Private Wealth Management.

The CBOE Volatility Index, a barometer of expected near-term stock market volatility, closed at its highest since the election. It slipped Friday but was up more than 50% for the week.

Macy's (M.N) shares closed down 10.2 percent and Kohl's (KSS.N) fell nearly 6 percent as the companies continued to report a drop in quarterly same-store sales, stoking concerns that their turnarounds may still be a long way off. It fell 1.43 percent for the week, the most since the week of March 24.

J.C. Penney Co. (JCP) slumped 17% after it reported a wider-than-expected second-quarter loss (http://www.marketwatch.com/story/jc-penney-shares-sink-after-losses-exceed-expectations-2017-08-11). And Blue Apron shares dipped after its first earnings report as a public company. The stock fell another 2 cents, or 0.4%, to 5.12 Friday.

The rouble was little changed at 60.1 against the dollar and firmed 0.05 percent to 70.7 versus the euro. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 2 basis points at 2.192%.

Excluding food and energy prices, core consumer prices still crept up by 0.1 percent in July, matching the increases seen in the three previous months.

Friday's report was the latest in a string of lackluster inflation readings, which have surprised many investors who had entered the year betting on an upsurge in economic growth and inflation.

Federal funds futures suggested the chance of rate hike in December fell to 40 percent from 42 percent shortly before the release of the data.

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