Wall Street Tumbles as North Korea, Trump Trade Threats

Updated from 9:35 a.m. ET, Wednesday, Aug. 9. 

Stocks were trading lower on Wednesday, Aug. 9, as geopolitical tensions with North Korea resurfaced. 

The Dow Jones Industrial Average was down 0.28%, the S&P 500 fell 0.35%, and the Nasdaq slipped 0.66%.

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.

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Global markets were sharply lower on Wednesday. Germany’s DAX declined 1.1%, the CAC 40 in France fell 1.7%, the FTSE 100 in London declined by 0.7%, Japan’s Nikkei closed 1.3% lower, and the Shanghai Composite dipped 0.2%. Meanwhile, safe-haven assets such as gold and silver rallied. 

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.

Markets were sharply lower on Wednesday, though refrained from a heavy selloff. The Dow was down for its second day in a row after ten 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 a major weight on markets, stumbling 5%, following its earnings report on Tuesday. 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. 

CEO Bob Iger said Disney is planning to leverage new technologies to sell its television shows, movies and sporting events directly to consumers while maintaining its current relationships with pay-TV operators.


President Trump.

“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 announced a deal to take a majority stake in BAMTech, the technology platform that already powers its digital services. Disney will pay $1.58 billion to acquire 42% of BAMTech, a sprawling operation originally created by Major League Baseball. A year ago, Disney purchased a 33% stake in BAMTech for $1 billion. Iger said that controlling BAMTech will allow Disney to roll-out the direct-to-consumer services.

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 nearly 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)   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%. 

Mylan NV ( MYL)  dropped 3% 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.”

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 were higher ahead of a weekly read on domestic stockpiles from the Energy Information Administration. Crude stockpiles fell by 1.5 million barrels in the previous week, while distillate stocks dropped by 150,000 barrels. Separate data from the American Petroleum Institute found a sharp decline of 7.839 million barrels in crude oil inventories in the U.S. in the week ended Aug. 4. 

West Texas Intermediate crude was up 0.45% to $49.39 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 0.2% Wednesday.

Apple is a holding in Jim Cramer’s Action Alerts PLUS Charitable Trust Portfolio . Want to be alerted before Cramer buys or sells AAPL? Learn more now.

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