What looked to be a terrible day turned out fairly upbeat with earlier sharp losses quickly turning into gains around the session's midway mark. Investors brushed aside the threat of conflict with North Korea on Tuesday, Aug. 29, to push stocks to modest gains.
The Dow Jones Industrial Average was up 0.26%, the S&P 500 added 0.08% and the Nasdaq increased 0.3%. The CBOE Volatility Index, otherwise known as the "fear index," spiked nearly 4% to 11.75.
Markets in Europe and Asia tumbled on Tuesday after North Korea launched its latest missile test, the first to fly directly over Japan since 2009. North Korea's missile test was launched late Monday evening and landed just 1,200 kilometers (750 miles) off the Japanese island of Hokkaido.
The latest move from North Korea will likely increase geopolitical risk in the region. Japanese Prime Minister Shinzo Abe called the move an "unprecedented, grave and serious threat that seriously damages peace and security in the region."
Donald Trump, in a statement from the White House on Tuesday, said, "All options are on the table" with regards to North Korea. The president in the past has threatened military action if North Korea continued to threaten the U.S. and its allies. Trump previously said the U.S. would bring "fire and fury" should North Korean and its leader Kim Jong-un continue to issue threats.
U.S. ambassador to the U.N. Nikki Haley said Tuesday that "something serious has to happen ... Enough is enough." The U.N. Security Council will reportedly hold a closed meeting on North Korea on Tuesday.
Worries over North Korea sent investors into safe-haven assets such as gold. Gold for December delivery jumped .03% to $1,318.20 an ounce on Tuesday. Gold has gained more than 10% since early July as investors move cash into traditional safe-haven assets amid the rising military and political tensions in Asia following a series of missile tests by North Korea.
"Investors are concerned that this may lead to retaliation from not only Japan and South Korea but the U.S. too, especially given the rhetoric Donald Trump deployed a couple of weeks ago," said Fawad Razaqzada, market analyst at Forex.com.
United Technologies Corp. (UTX) was the best performer on the Dow, helping to lift the blue-chip index out of the red. The defense stock spiked following a Wall Street Journal report that said the company is close to purchasing Rockwell Collins Inc. (COL) in a deal worth more than $20 billion. An agreement could be made as soon as the end of the week.
Home prices increased at a faster pace in June than in May, largely tied to price increases in Seattle, according to the S&P Corelogic Case-Shiller Home Price Index. National home prices increased 5.8% in June, up from 5.7% in May. Economists expected the measure to remain steady at May levels.
Consumer confidence strengthened in August, just below a 16-year high set in March. The Consumer Confidence Index increased to 122.9 in August, far better than an anticipated decline to 120.3. Optimism increased to 121.1 in July.
Nike Inc. (NKE) was down 2% on Tuesday after Morgan Stanley downgraded the stock on slowing sales in North America. Sales in North America have slowed "much more than anticipated" since the companies fourth-quarter earnings, Morgan Stanley analyst Jay Sole wrote in a Tuesday note. Sole cut Nike's full year 2018 earnings per share target to $2.44 from a previous $2.58.
Sole also cut the sports shoe maker's sales forecast to a 2% decline from 3% growth. The move by Morgan Stanley comes as commentary from sports retailing companies such as Dick's Sporting Goods Inc. show that Nike sales have slipped and prices are expected to decline. Morgan Stanley said it was concerned that Nike has lost some of its core customers to Adidas AG (ADDYY) .
Finish Line Inc. (FINL) followed Nike shares into the red on Tuesday morning, falling 18%. The footwear retailer plummeted roughly 20%. On Monday, Finish Line slashed its second-quarter forecast to 8 cents a share in profit on $470 million in sales. CEO Sam Sato said, "The marketplace for athletic footwear became much more promotional as our second quarter progressed resulting in challenging sales and gross margin trends." Susquehanna analysts lowered their price target to $9 from $15 on Tuesday.
Weather troubles in Texas are expected to continue for several more days with forecasters predicting another 15 inches of rain in parts of southeastern Texas and southwestern Louisiana, an area that includes Houston. So far, Houston police and officials have rescued 3,400 people and more than 17,000 are in shelters in Texas, according to CNN. Houston's Addicks Reservoir has spilled over for the first time ever.
Stocks closed the trading day narrowly mixed on Monday, Aug. 28, as insurance and energy industries grappled with the fallout of Tropical Storm Harvey's devastation in and around Houston. Tropical storm Harvey's devastating flooding has taken almost 17% of U.S. refining capacity offline and about 10% of crude production, creating an imbalance that is likely to lead to larger U.S. crude inventories and weigh on crude prices.
Much of the U.S.'s refining capacity is located in the coastal region of Texas where the storm made landfall on Sunday night and where flooding has been worst. The storm is expected to lash the Gulf of Mexico's coast on Tuesday with the National Hurricane Center predicting as much as 50 inches of rain in some regions, contributing to "ongoing catastrophic and life-threatening flooding from Texas to Louisiana."
West Texas Intermediate fell on Tuesday. Prices were down 0.2% to $45.88 a barrel.
Best Buy Co. (BBY) sank 12% despite besting second-quarter estimates. The electronics retail chain earned 67 cents a share over its recent quarter, up form 61 cents a share a year earlier. On an adjusted basis, earnings of 69 cents a share came in above estimates of 63 cents. Revenue of $8.9 billion exceeded consensus of $8.7 billion. Same-store sales rose 5.4%, far better than a targeted 2.1% increase. CEO Hubert Joly said higher sales were "driven by stronger consumer demand for technology products and by the strong execution of our strategy." Best Buy also increased its full-year revenue guidance to 4% growth from 2.5%.
Movado Group Inc. (MOV) rose 19% after a better-than-expected quarter. Net income dipped to 24 cents a share over its second quarter from 27 cents in the year-ago three-month period. Adjusted earnings of 43 cents a share came in far higher than an estimated 23 cents. Sales of $128.8 million exceeded estimates of $119 million. Movado also increased its full-year sales and earnings estimates.
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