Financial markets have tended to quickly shake off North Korea’s periodic sabre-rattling in the past, dismissing it as bluster, but tensions have lingered this year amid signs that it is making progress in its ballistic missile programme and on Trump’s growing frustration with Pyongyang.
Major stock indexes overseas also racked up losses Thursday.
The dollar carried over its weakness from overnight trading overseas, where dollar selling gathered steam following a news report citing USA intelligence officials as saying that North Korea has succeeded in making a nuclear warhead that is small enough to be mounted on its missiles.
After threatening to visit “fire and fury” on North Korea, President Donald Trump said that maybe the warning “wasn’t tough enough”. Tensions have been rising in the Korean Peninsula, and reached a new level with President Trump’s “threat” of “fire and fury” against North Korea if they should proceed with a missile strike against Guam, a USA territory located in the Pacific.
A notable decline by Disney (DIS) is likely to help drag the Dow lower, with the entertainment giant under pressure in pre-market trading. The move added to escalating U.S. Macy’s was down 4.4 percent after the company said its sales continued to decline in the second quarter.
The Labor Department also said unit labor costs rose by 0.6 percent in the second quarter following an upwardly revised 5.4 percent spike in the first quarter. Economists had expected productivity to increase by 0.7 percent.
For the week the S&P fell 1.4 percent and the Dow lost 1.1 percent – their largest weekly drops since the week ending March 24 – and the Nasdaq was off 1.5 percent.
Stocks fluctuated over the course of the trading session on Tuesday before eventually closing modestly lower. “Risk aversion is still very much a concern for markets”, said Shaun Osborne, chief currency strategist, at Scotiabank in Toronto.
“More likely than anything else, the price action was a function of an overextended US equity market that has been in need for a healthy correction off record highs”, LMAX Exchange analysts said in a morning note.
The euro was 0.1 percent weaker at 129.600 yen and the Australian dollar slipped 0.2 percent to 87.13 yen.
While the Russell 2000 index ended up 0.1 percent on the day, it was more than 5 percent below its July 25 record close and for the week it fell 2.7 percent, its biggest weekly drop since February 2016.
Gold added $10.80, or 0.8 percent, to settle at $1,290.10 an ounce.
On the currency front, the US dollar is trading at 109.74 yen compared to the 110.32 yen it fetched at the close of NY trading on Tuesday.
“A combination of softer euro zone economic data, solid USA reports and market positioning all resulted in a markedly heavier tone for the single currency”, Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington, said in a note.