North Korea Warns U.S. That It Won't Be Able to Dodge 'Merciless Strike'
Kim Jong-un, North Korea.

So much for North Korea finally quieting down.

North Korea warned Sunday that its army could target the U.S. at anytime, and that Guam, Hawaii nor the mainland won't be able to "dodge the merciless strike." The country added in its official government newspaper Rodong Sinmun that the United States' upcoming military exercises with South Korea are "reckless behavior driving the situation into the uncontrollable phase of a nuclear war."

CNN first reported the news. 

To be sure, this latest saber-rattling from North Korea is the last thing Wall Street needs right now. 

Small losses on Friday, Aug. 18, followed a major selloff a day earlier that handed the Dow Jones Industrial Average its worst performance in three months.

The Dow, S&P 500 and Nasdaq ended Friday with weekly losses amid ongoing turmoil in the White House and terrorist attacks in Spain. The Dow declined by 0.84% during the week, the S&P 500 dropped by 0.65% and the Nasdaq shed 0.54%

The Dow spent the majority of the week under its 22,000 level, closing higher than that mark only once in the past five days. The blue-chip index first closed above that level on Aug. 2. The Dow is now more than 300 points from its all-time closing high of 22,118 set on Aug. 7. The S&P 500 is nearly 50 points from its own closing record set on the same day.

Wall Street will have several things on its mind this coming week besides geopolitical risks.

President Trump.
President Trump.
 

Federal Reserve Chair Janet Yellen draws focus in the back-half of the week as a September meeting of the Federal Open Market Committee draws closer. Yellen and her European counterpart Mario Draghi, European Central Bank president, will speak at the annual Economic Policy Symposium in Jackson Hole, Wyo. The highly anticipated yearly event stretches from Thursday to Saturday, Aug. 26.

Investors largely expect the Fed to begin unwinding its balance sheet in September, a move the central bank had previously said it would implement "relatively soon," provided the economy expands as expected. Paring the central bank's sizable assets would likely tighten monetary conditions in the same way an interest-rate hike would. Another rate increase is not expected until December at the earliest. 

However, weak inflation trends could delay the Fed's timing. On top of that, a number of Fed members have said that even with a series of interest rate hikes forecast over the next 18 months, the long-term federal funds rate will likely remain below historical averages.

"The debate that they and other central banks should be having at Jackson Hole is how to deal with future crises," said Aberdeen Standard Investments' Luke Bartholomew. "The reality is that the conventional tools that they've used in the past simply won't be as effective in the future with interest rates likely to be permanently lower. This might well lead to debates about whether to raise the inflation target or change the way those targets work."

Here is one top forecaster looking for a bear market.

Meanwhile, earnings season is still front and center. 

All told, it's been a successful period, with more than two-thirds of S&P 500 companies beating analysts' estimates on the top- and bottom-line. Of the more than 90% of companies that have reported so far, nearly 74% have topped earnings forecasts and 68% have exceeded revenue estimates. Thomson Reuters' blended earnings growth estimate is 12%.

By sector, energy names have contributed by far the largest increase in earnings and revenue growth, up 537.4% and 15.6%, respectively. The sector has benefited from easy year-over-year comparisons and a stabilizing oil market. Consumer staples and consumer discretionary have seen the slowest gains.

The mall is in bad shape.
The mall is in bad shape.

Retail earnings will again be in the spotlight in the coming week, though there are none as high-profile as Walmart Stores Inc. (WMT) and Macy's Inc. (M) , both of which have already reported. Judging by how Macy's and Foot Locker (FL) did in the second quarter, earnings from mall retailers could be another risk to already shaky markets. 

Apparel retailers are ones to watch. American Eagle Outfitters (AEO) , Express Inc. (EXPR) , PVH Corp. (PVH) , and Tilly's Inc. (TLYS) will report on Wednesday, Aug. 23; and Abercrombie & Fitch Co. (ANF) , Perry Ellis International Inc. (PERY) , and Burlington Stores Inc. (BURL) on Thursday, Aug. 24.

More consumer and retail earnings include Ruby Tuesday Inc. (RT) on Monday, Aug. 21; Coty Inc. (COTY) , DSW Inc. (DSW) , Kirklands Inc. (KIRK) , and La-Z-Boy Inc. (LZB) on Tuesday, Aug. 22; Lowes Companies Inc. (LOW) on Wednesday; and GameStop Corp. (GME) , Michaels Cos. (MIK) , Signet Jewelers Ltd. (SIG) , JM Smucker Co. (SJM) , and Tiffany & Co. (TIF) on Thursday.

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