Rising tensions between the U.S. and North Korea on Wednesday, Aug. 9, sent Wall Street lower for a second session.
The Dow Jones Industrial Average was down 0.27%, the S&P 500 fell 0.2%, and the Nasdaq slipped 0.38%.
Donald Trump struck a defiant stance against North Korea on Tuesday afternoon, warning of severe retribution should the authoritarian state proceed with any more missile tests or threats. In a statement delivered at his Bedminster, New Jersey golf club, Trump said, "North Korea best not make any more threats to the U.S. They will be met with fire and fury like the world has never seen." Trump tweeted Wednesday morning that one of his first orders as president was to "renovate and modernize" the nuclear arsenal.
Trump's comments follow on from reports that North Korea had successfully produced a nuclear warhead that could be fitted inside its missiles. The U.N. Security Council unanimously voted on Saturday to impose new sanctions on North Korea after several missile tests.
Secretary of State Rex Tillerson defended Trump's remarks. "What the president is doing is sending a strong message to North Korea in language that Kim Jong Un can understand, because he doesn't seem to understand diplomatic language," said Tillerson. "I think the president just wanted to be clear to the North Korean regime on the U.S. unquestionable ability to defend itself, will defend itself and its allies."
Officials in North Korea said they were "carefully examining" a strike on Guam, which is home to around 163,000 people and two U.S. military installations and threatened a further "all-out war wiping out all the strongholds of enemies, including the U.S. mainland" in a government statement.
The Dow made a swift move lower on Tuesday, Aug. 8, to snap a record-breaking streak following Trump's comments on North Korea. The Dow tumbled 0.15% in the final hour on Tuesday, Aug. 8, fleeing from an intraday record set earlier and breaking a nine-day streak of closing at all-time highs. The Dow had been on track for its 10th record close in a row earlier in the session.
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"Could investors have overreacted to the news, or was that the excuse needed for the sellers to come in and take advantage of the extremely overbought equity prices?," Fawad Razaqzada, market analyst at Forex.com, wrote in a note. "Lots of questions, but by the close of the bell tonight we should have a good feel for sentiment one way or another. But as things stand, risk is definitely off the menu and if you-know-what hits the fan then things could turn ugly really quick."
Markets were lower on Wednesday, though refrained from a heavy selloff. The Dow was down for its second day in a row after 10 days of steady gains. Still, trading has been fairly range-bound over the summer with volatility at multi-year lows. The Dow has not closed with a rise or fall of more than 1% since March 21. In fact, the Dow has only closed more than 1% higher or lower in just five trading sessions this year.
Walt Disney Co. (DIS) was the worst performer on the Dow, stumbling 4.5%, following its earnings report on Tuesday evening. The media group reported slower-than-expected second quarter revenue growth at its cable division and said it would invest in online streaming streaming services to offset falling ad sales. Earnings of $1.58 a share came in 3 cents above estimates, while revenue dipped 0.3% to $14.24 billion and missed expectations by $180 million.
"It's high time given the technology available to us that we connect to them directly," Iger said Tuesday following the release of earnings. "We believe ultimately that our ability to generate revenue and grow profits will be greater than the business models that we currently have."
Disney also announced plans to pull its catalog from streaming service Netflix Inc. (NFLX) as it prepares to launch direct-to-consumer streaming in 2019. Shares of Netflix were down 2%.
Fossil Group Inc. (FOSL) slumped 23% after it reported a wider loss than anticipated and a double-digit drop in revenue. The luxury retailer reported a net loss of 61 cents a share, 15 cents short of estimates. Revenue tanked 12.9% to $596.8 million, missing targets by $21 million.
Priceline Group Inc. (PCLN) , down 8%, was one of the worst performers on the S&P 500 following a better-than-expected second quarter but below-consensus current-quarter guidance. The travel-booking site anticipates adjusted third-quarter guidance of $32.40 to $34.10 a share, below consensus of $34.21. Gross travel bookings are expected to increase by 11% to 16%. Over its second quarter, Priceline earned an adjusted $15.14 a share, higher than estimates, while sales increased 21%.
Disney, Fossil and Priceline pulled the cyclical consumer sector to the bottom of the S&P 500. Other sector losers included Starbucks Corp. (SBUX) , Toyota Motor Corp. (TM) , Twenty-First Century Fox Inc. (FOXA) and Las Vegas Sands Corp. (LVS) . The Consumer Discretionary Select SPDR ETF (XLY) declined by 0.8%.
Mylan NV (MYL) dropped 0.7% after a disappointing recent quarter and gloomy outlook. Adjusted earnings of $1.10 a share fell short of estimates by 6 cents, while revenue of $2.962 billion came in short of estimates of just over $3 billion. The drugmaker anticipates full-year adjusted earnings of $4.30 to $4.70 a share, lower than an analyst target of $5.13. A weaker full year is tied to Mylan's decision to push all major U.S. launches into 2018 guidance numbers "given the region's ongoing challenges and the uncertain U.S. regulatory environment."
Office Depot Inc. (ODP) tanked 22% after falling short of earnings and sales estimates over its second quarter. The stationery retailer also said it anticipates full-year sales to be "lower" than a year earlier, largely due to store closures and a difficult retail environment.
Hertz Global Holdings Inc. (HTZ) surged more than 23% after CEO Kathryn Marinello said there has been "significant progress" in its turnaround plan. Marinello said the company has worked to downsize its fleet. A quarterly miss was tied to "increased spending to fix areas of weakness and invest in areas of opportunity." The rental company reported a sharper net loss in its second quarter than anticipated, while revenue fell 2.2%.
Nearly 90% of S&P 500 companies have reported earnings so far this earnings season. Of those, just over 73% have exceeded profit estimates, above the historical average of 64%, according to Thomson Reuters data. Almost 69% have topped revenue estimates, also above the average of 59%.
U.S. productivity in the second quarter picked up speed, showing growth of 0.9%, up from a revised 0.1% increase over the first quarter. Unit labor costs rose by 0.6%, a sharp decline from an increase of 5.4% in the first quarter. Hours worked grew 2.5%.
Crude oil prices gave back most of its gains even after a far sharper decline in domestic inventories than anticipated. U.S. stockpiles fell by 6.5 million barrels in the past week, according to the Energy Information Administration. The decline was more than double an estimated drop of 2.7 million barrels. Gasoline stockpiles increased, while distillates dropped.
West Texas Intermediate crude was up 0.22% to $49.29 a barrel on Wednesday.
Apple Inc. (AAPL) could become the first company to reach $1 trillion in market cap, RBC Capital analysts said in a note on Wednesday. Apple has gained $56 billion in market value since it announced increasingly optimistic guidance for its third quarter last week, bringing its current market value to $826.85 billion. RBC said Apple stock has plenty of upside left as it closes in on the mid-September launch of the 10th anniversary iPhone. Apple added 0.4% Wednesday.
Updated from 1:35 p.m. ET, Wednesday, Aug. 9.
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