Three Fed speakers are on the docket on Tuesday
U.S. stocks fell on Tuesday, with the latest development in the heightened tensions between the West and North Korea adding to the market's geopolitical uncertainty and chilling buying enthusiasm.
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Low trading volume, particularly as investors returned from a holiday-lengthened weekend, added to the tepid tone on Wall Street.
The Dow Jones Industrial Average fell 0.4%, or 89 points, to 21,900. The S&P 500 lost 7.4 points, or 0.3%, to 2,469. The Nasdaq Composite Index was down 20 points to 6,415, a drop of 0.3%.
The S&P 500 is coming off a six-day rally while the Dow has risen in each of the past four sessions.
The standoff between North Korea and the U.S. and its allies escalated over the weekend after Pyongyang said it had successfully tested its largest-ever nuclear bomb (http://www.marketwatch.com/story/north-korea-hails-perfect-success-of-latest-nuclear-test-triggering-magnitude-63-earthquake-2017-09-03). The isolated regime is said to be ready to launch a new intercontinental ballistic missile (http://www.marketwatch.com/story/north-korea-is-getting-ready-for-another-possible-icbm-launch-says-south-korea-2017-09-04) as soon as this Saturday when the country celebrates its founding day.
The latest in Pyongyang's series of missile and bomb tests has hardened the rhetoric from the U.S. Defense Secretary Jim Mattis warned North Korea that it would be met "with a massive military response" (http://www.marketwatch.com/story/we-have-many-military-options-mattis-warns-north-korea-2017-09-03) if it attacks the U.S., Japan or South Korea, while Nikki Haley, the U.S. ambassador to the United Nations, said at a UN Security Council emergency meeting that Kim Jong Un was "begging for war." (http://www.marketwatch.com/story/nikki-haley-says-kim-jong-un-appears-to-be-begging-for-war-2017-09-04)
"With tougher sanctions on North Korea looking to be the most likely scenario, markets will discount the possibility of war, but the risk-off mode may continue to persist a little longer, as there may be more missile launches on the horizon," said Hussein Sayed, chief market strategist at FXTM.
"Investors have been searching for a catalyst that will lead to a steep market correction, but if a hydrogen bomb wasn't enough to trigger the selloff, then any new experiments from the Kim Jong Un regime won't get traction and investors should focus elsewhere," he said in a note.
Read:Putin warns of 'global catastrophe' if West turns up heat on North Korea (http://www.marketwatch.com/story/putin-warns-of-global-catastrophe-if-west-turns-up-heat-on-north-korea-2017-09-05)
U.S. markets were closed for trade on Monday in observance of Labor Day, but U.S. stock futures traded in negative territory (http://www.marketwatch.com/story/us-stock-futures-drop-after-north-korea-test-as-traders-take-labor-day-break-2017-09-04). European and Asian markets sold off on Monday, while gold and the yen advanced in a wider flight to assets perceived as less risky.
See:How North Korea's nuclear test rattled markets--in 5 charts (http://www.marketwatch.com/story/how-north-koreas-nuclear-test-rattled-markets-in-5-charts-2017-09-04)
Gold rose 0.5% following the latest developments, trading at $1,337.40 an ounce, up $5 from Friday's settlement. However, they hit almost $1,345 on Monday in electronic trade.
The yen continued to rise, with the dollar buying Yen109.19, down from Yen109.73 late Monday in New York. Japan's currency is frequently seen as a safe-haven asset.
Economic news: A trio of Fed speakers are on the docket on Tuesday.
Fed Gov. Lael Brainard said that the Fed may have to slow down its pace of interest-rate hikes (http://www.marketwatch.com/story/fed-may-have-to-slow-interest-rate-hikes-given-subdued-inflation-brainard-2017-09-05), citing the recent low readings for inflation. She indicated that if low inflation "proves transitory," then the central bank may continue its current expected pace, for one additional hike in 2017 and three in 2018.
At 7 p.m. Eastern, Dallas Fed President Robert Kaplan will participate in a moderated Q&A session in Dallas.
"Investors will be looking to assess how stronger than expected economic growth but weaker than forecast labor market data may influence the Fed's monetary policy moving through towards the end of the year," said Fiona Cincotta, market analyst at City Index, in a note.
Check out:Tune in Tuesday morning to hear the thinking of the Fed's inner circle (http://www.marketwatch.com/story/tune-in-early-tuesday-morning-to-hear-the-thinking-of-the-feds-inner-circle-2017-09-01)
On the data calendar, the only major release is a report on factory orders for July, due at 10 a.m. Eastern Time.
September is historically the worst month of the year for equities, and political issues are adding to the uncertain tone this year. In addition to North Korea, the federal debt ceiling must be raised by late September. A spending bill also must be approved by Sept. 30 to avoid a government shutdown. While Goldman Sachs views a shutdown as unlikely--in a note released on Tuesday it forecast a 15% chance of that occurring, down from an earlier calculation of 35%--President Donald Trump has said he wants a wall on the border between Mexico and the U.S. to be funded as part of any deal to keep the government open.
Read: The stock market is back near records--but its stiffest headwinds are ahead (http://www.marketwatch.com/story/the-stock-market-is-back-near-recordsbut-its-stiffest-headwinds-are-ahead-2017-09-02)
Counterpoint:September stinks for stocks? No, this month actually looks like yet another winner (http://www.marketwatch.com/story/september-stinks-for-stocks-no-this-month-actually-looks-like-yet-another-winner-2017-09-05)
See:MarketWatch's economic calendar (http://www.marketwatch.com/economy-politics/calendars/economic)
Stock movers: Shares of United Technologies Corp.(UTX) slipped 2.9% after the industrial conglomerate said late Monday it had reached a deal to buy airplane-parts maker (http://www.marketwatch.com/story/united-technologies-seals-23-billion-deal-to-buy-rockwell-collins-2017-09-05)Rockwell Collins Inc.(COL) for $23 billion, in the biggest aerospace deal in history. Rockwell shares were up 1%. News of a potential deal first surfaced last month (http://www.marketwatch.com/story/united-technologies-closing-in-on-20-billion-deal-for-rockwell-2017-08-29).
Insmed Inc.(INSM) rocketed 134% after the biotech firm said its study into NTM lung disease met its primary endpoint and it now plans to request a priority review and accelerated approval.
U.S.-listed shares of Cellectis SA tanked 27% after the Food and Drug Administration ordered the French cell therapy specialist to put a cancer-drug trial on hold.
U.S.-listed shares of Merck KGaA(MRK.XE) rose 2.2% after the German pharma giant put its consumer health business up for sale (http://www.marketwatch.com/story/merck-rises-2-after-health-business-is-put-up-for-sale-2017-09-05).
Teleflex Inc.(TFX) said it is buying medical device company NeoTract Inc. in a deal valued at up to $1.1 billion (http://www.marketwatch.com/story/teleflex-to-buy-neotract-for-up-to-11-billion-in-cash-and-potential-milestone-payments-2017-09-05). Shares of Teleflex rose 0.4%.
After the market closes on Tuesday, Hewlett Packard Enterprise Co.(HPE) is slated to report earnings.
Read:Why Hewlett Packard Enterprise stock plunged Friday (http://www.marketwatch.com/story/why-hewlett-packard-enterprise-stock-plunged-friday-2017-09-01)
Other markets:Asian markets closed mixed (http://www.marketwatch.com/story/wary-investors-weigh-on-asian-markets-after-north-korean-nuclear-test-2017-09-03), with South Korea's Kospi index continuing to fall, but stocks in China ending higher.
European stocks were higher (http://www.marketwatch.com/story/european-stocks-push-higher-as-deal-news-eclipses-north-korea-worries-2017-09-05) almost across the board, rebounding from North Korean-fueled losses from Monday.
Oil prices (http://www.marketwatch.com/story/oil-prices-rally-gasoline-slumps-as-gulf-coast-refineries-come-back-after-harvey-2017-09-05) rallied, but gasoline futures slumped as more refineries powered up operations after Hurricane Harvey.
(END) Dow Jones Newswires
September 05, 2017 09:51 ET (13:51 GMT)