Dow’s Streak of Nine Consecutive New Highs Comes to an End Amid North Korea Tensions
The Dow Jones Industrial Average snapped its remarkable winning streak on Tuesday, as U.S. stocks ended on a whimper amid escalating tensions on the Korean peninsula.
Dow Falls for the First Time in 11 Days
The Dow snapped a ten-day winning streak, including nine consecutive record highs. The blue-chip index fell 33.08 points, or 0.2%, to close at 22,085.34. Over its ten-day winning streak, the index returned 2.8%.
Losses were not limited to the Dow blue-chips. The broader S&P 500 Index declined 5.99 points, or 0.2%, to close at 2,474.92. The technology-focused Nasdaq Composite Index was also down 13.31 points, or 0.2%, to 6,370.46.
Despite Tuesday’s declines, market volatility remains abnormally low. The CBOE VIX, which tracks expected volatility over the next 30 days, rose more than 10% on Tuesday, but is trading at roughly half of its historic mean.
North Korea Tensions Trigger Pullback
The pullback on Tuesday was partially attributed to growing tensions over North Korea’s ballistic missile program, with Pyongyang warning that it is “carefully examining” a potential strike on the U.S. Pacific territory of Guam. The remarks came mere hours after U.S. President Donald Trump warned the North Koreans that any threat to homeland security would be met with “fire and fury.”
According to Reuters, geopolitical tensions drove fresh declines in Asian stocks in early Wednesday trading. U.S. equity futures were also down across the board. Meanwhile, the Japanese yen rose alongside gold, as investors opted for the safety of haven assets.
Geopolitics play an important role in the financial markets, but the impact rarely lasts. Wall Street will likely remain in a firm uptrend as corporate earnings continue to steamroll expectations. S&P 500 companies have reported double-digit profit growth for the second quarter. That puts them on track for their best quarter of year-over-year gains since 2011.