Strong earnings seen as providing calm over past three weeks
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U.S. stocks closed down Wednesday, but off session lows as tensions between North Korea and the U.S. added a dollop of geopolitical uncertainty to markets, and as high-profile companies disappointed with their quarterly results.
The Dow Jones Industrial Average declined 36.64 points, or 0.2%, to close at 22,048.70, after briefly losing its grip on the psychological milestone of 22,000. Fourteen out of the average's 30 components finished lower.
Walt Disney Co.(DIS) was the biggest weight on blue chips, tumbling 3.9% a day after the media giant reported its quarterly results and announced plans to end (http://www.marketwatch.com/story/disney-details-launch-of-espn-and-disney-streaming-services-plans-end-of-netflix-deal-2017-08-08) its distribution deal with Netflix Inc.(NFLX) and launch its own ESPN and Disney streaming services. Shares in streaming-giant Netflix, a major contributor to the overall market's gains this year, fell 1.5%.
The S&P 500 index slipped 0.90 point, or less than 0.1%, to finish at 2,474.02, overcoming an earlier 13-point deficit. Of the 11 sectors on the S&P 500, only the utilities, consumer-discretionary, telecom and financial sectors finished in the red.
The Nasdaq Composite Index closed down 18.13 points, or 0.3%, at 6,352.33, paring an earlier 61-point decline.
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In the latest escalation of tensions between Washington and Pyongyang, the isolated Asian country threatened a missile strike (http://www.marketwatch.com/story/north-korea-threatens-missile-strike-on-us-base-on-guam-2017-08-08) at U.S. territory Guam. That saber-rattling came a day after U.S. President Donald Trump said he would respond with "fire and fury like the world has never seen (http://www.marketwatch.com/story/trump-today-president-says-north-korea-faces-fire-and-fury-if-it-doesnt-halt-threats-2017-08-08)" if the country doesn't halt its threats.
Read more:How Trump's threat of 'fire and fury' is rattling stock-market calm (http://www.marketwatch.com/story/how-trumps-threat-of-fire-and-fury-is-rattling-stock-market-calm-2017-08-09)
Check out:Guam's governor says 'there is no threat' but U.S. island 'will be defended' (http://www.marketwatch.com/story/guams-governor-there-is-no-threat-but-american-island-will-be-defended-2017-08-09)
The heightened tensions come at a time when stocks have enjoyed a lengthy climb. The Dow recently rose for 10 straight sessions, a streak that ended on Tuesday, also halting an attempt at 10 successive closes in record territory. The S&P is also less than half a percentage point of its own record, with the Nasdaq about 1% off its own.
"Definitely the primary reason stocks are down is geopolitical tensions," said J.J. Kinahan, chief strategist at TD Ameritrade, in an interview. "But that's coming off 10 days higher on the Dow and we're still at highs. As much as we'd like to see the market go straight up, there's got to be a day of reckoning."
Recent market action has been slight, with small intraday moves and low volatility. On Monday, the S&P 500 moved in a range of just 0.2%, the third smallest range of the past 20 years, according to data from LPL Financial.
Meanwhile, the CBOE Volatility index has been near all-time lows, though it rose less than one point on Wednesday, up 5.8% to 11.60. It had seen a steeper rise before paring its gains.
Even with the pullback, it's amazing how calm markets are even with the alarming headlines, said Ryan Detrick, senior market strategist for LPL Financial, in an interview. So far, the S&P 500 has gone 15 sessions without a change of 0.3% or more, he said.
"We're amazed at how calm things have been," Detrick said. "We think it kind of comes down to: Below the headlines, we have a very strong global economy and strong global earnings. It's not perfect but it's expanding and improving."
Related:A problem for buy-the-dip investors: no dips to buy (http://www.marketwatch.com/story/a-problem-for-buy-the-dip-investors-no-dips-to-buy-2017-08-08)
Others saw silver linings in the prospect of a stock-market downturn.
"No one wants to see military escalation, but we think a pullback is healthy," said Randy Frederick, vice president of trading and derivatives for Charles Schwab.
Individual movers:Priceline Group Inc.(PCLN) finished down 6.9%. The online-travel broker late Tuesday posted quarterly earnings that topped forecasts, but bookings missed expectations (http://www.marketwatch.com/story/priceline-shares-plunge-6-on-second-quarter-results-2017-08-08). TripAdvisor Inc. shares (TRIP) rose 2.5% even as the operator of travel websites reported weaker-than-expected quarterly results (http://www.marketwatch.com/story/tripadvisor-shares-fall-6-after-company-misses-quarterly-views-2017-08-08) late Tuesday.
A handful of defense contractors trended higher with the sabre-rattling. Shares of Raytheon Co.(RTN) closed up 2.6%, while Rockwell Collins Inc. (COL) shares rose 0.6%. L3 Technologies Inc.(LLL) rose 2%, Lockheed Martin Corp.(LMT) advanced 1.7%, Northrop Grumman Corp.(NOC) was up 1.2%, and General Dynamics Corp.(GD) ticked 1.1% higher.
Retailer Office Depot Inc.(ODP) plummeted nearly 26% after it posted a quarterly profit that missed expectations (http://www.marketwatch.com/story/office-depots-profit-misses-expectations-as-sales-decline-2017-08-09).
Drugmaker Mylan NV(MYL) rose 0.9% after its results, while fast-food chain Wendy's Co.(WEN) rose 3.8%.
Economic news: Productivity or how many goods and services U.S. workers produce an hour rose at an annual rate of 0.9% in the second quarter (http://www.marketwatch.com/story/us-productivity-picks-up-a-bit-in-second-quarter-2017-08-09) from the prior three months, the Labor Department said Wednesday. This is up from a 0.1% rate in the first quarter.
Check out:MarketWatch's Economic Calendar (http://www.marketwatch.com/economy-politics/calendars/economic)
On the Federal Reserve front, Chicago Fed President Charles Evans said he supported starting a reduction of the central bank's $4.5 trillion balance sheet in September but was ambivalent about another rate hike this year (http://www.marketwatch.com/story/feds-evans-backs-balance-sheet-reduction-but-ambivalent-toward-another-rate-hike-2017-08-09).
Other markets:Gold futures (http://www.marketwatch.com/story/gold-gains-about-1-as-us-north-korea-tensions-grow-2017-08-09) rose 1.3% to settle at $1,279.30 an ounce as investors moved toward safety plays, with the Swiss franc (http://www.marketwatch.com/story/dollar-slides-vs-swiss-franc-as-us-north-korea-discord-prompts-run-to-safety-2017-08-09) up 1.1%. European equities (http://www.marketwatch.com/story/european-stocks-slide-as-us-north-korea-strife-sends-haven-assets-higher-2017-08-09) closed lower, following the lead of Asian markets, (http://www.marketwatch.com/story/asian-markets-retreat-as-saber-rattling-over-north-korea-intensifies-2017-08-08) which finished lower. Oil futures (http://www.marketwatch.com/story/oil-prices-move-lower-as-geopolitical-tensions-rise-2017-08-09) settled up 0.8% at $49.56 a barrel after the latest inventory data showed a drop of 6.5 million barrels in the past week.
The ICE U.S. Dollar Index was slightly lower on the day.
--Victor Reklaitis in London contributed to this article.
(END) Dow Jones Newswires
August 09, 2017 16:37 ET (20:37 GMT)