Strong earnings seen as providing calm over past three weeks
U.S. stocks traded lower on Wednesday, extending a retreat from record levels 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.
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The Dow Jones Industrial Average fell 74 points, or 0.4%, to 22,008, with 13 out of the average's 30 components trading in negative territory.
Walt Disney Co.(DIS) was in particular view, tumbling 4.7% 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 2%. Dow component Disney was the biggest drag on the blue-chip average.
The S&P 500 index slipped 8 points, or 0.3%, to 2,467, with all 11 sectors lower on the session, with the consumer-discretionary, telecom and financial sectors the largest decliners.
The Nasdaq Composite Index lost 33 points, or 0.3%, at 6,337, a drop of 0.5%.
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 within 1 percentage point of its own record, with the Nasdaq not far behind.
"Definitely the primary reason stocks are down is geopolitical tensions," said JJ 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 nearly 10% to 12.05. If investors use the geopolitical issue as an opportunity to take profits, that could amplify the size of the swing that could occur.
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)
"The higher the market is, and the longer it has been since we've had a pullback, that creates a lot more room to the downside, and a lot more room for volatility to spike," said Randy Frederick, vice president of trading and derivatives for Charles Schwab.
"No one wants to see military escalation, but we think a pullback is healthy," he said.
Individual movers:Priceline Group Inc.(PCLN) dropped 7.6%. 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) shed 1.5%. 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) advanced 2.3%, while Rockwell Collins Inc. (COL) shares rose 1.4%. L3 Technologies Inc.(LLL) rose 1.7%, Lockheed Martin Corp.(LMT) advanced 1.5%, Northrop Grumman Corp.(NOC) was up 1.1%, and General Dynamics Corp.(GD) ticked 1.4% higher.
Retailer Office Depot Inc.(ODP) plummeted 23% 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) fell 0.7% after its results, while fast-food chain Wendy's Co.(WEN) rose 3.4%.
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) rose 0.1% after the latest inventory data showed a drop of 6.5 million barrels in the past week.
The ICE U.S. Dollar Index was down 0.1% on the day.
--Victor Reklaitis in London contributed to this article.
(END) Dow Jones Newswires
August 09, 2017 14:28 ET (18:28 GMT)