Stock Market Sell-off Sends Investors into Safe-haven Assets after Trump Issues Warning to North Korea

The major U.S. stock index futures closed lower on Tuesday after President Donald Trump issued a warning to North Korea, saying that its threats will be “met with fire and fury.”

In the cash market, the blue chip Dow Jones Industrial Average closed at 22085.34, down 33.08 or -0.15%. The bench mark S&P 500 Index settled at 2474.92, down 5.99 or -0.24% and the tech-based NASDAQ-100 Index finished the session at 6368.43, down 15.34 or -0.24%.

Trump directed his stern comment towards North Korea just hours after it was revealed by the Washington Post that Pyongyang had successfully created a miniaturized nuclear weapon designed to fit inside its missiles.

Stocks jumped early in the session after data showed U.S. job openings surged to a record high in June. The Dow rallied to another record high as well as the S&P 500 Index after the Labor Department said on Tuesday that job openings, a measure of labor demand, increased 461,000 to a seasonally adjusted 6.2 million, the highest level since the series started in December 2000.

Equities broke from their highs after the news about the North Korean nuclear weapon was released. Stock indexes turned lower for the session after Trump issued his warning.

U.S. Treasury Markets

U.S. Treasury yields rose on Tuesday as investors reacted to the job openings report. The market was closed when Trump issued his statement so there may not be a follow-through to the upside on Wednesday. Trump’s comments were bearish enough to trigger flight-to-safety buying into the Japanese Yen. The news may drive investors into the safety of U.S. Treasury Notes and Bonds, which will drive down yields.

Forex

Rising U.S. Treasury yields made the U.S. Dollar a more attractive investment, driving up the September U.S. Dollar Index. The rally helped drive the index through last Friday’s Non-Farm Payrolls report high. The Greenback retreated from its high into the close after Trump’s warning sent investors into the safety of the Japanese Yen and other currencies.

Gold

December Comex gold futures had a volatile session on Tuesday, changing direction several times before closing only slightly lower. A weaker dollar drove gold prices higher early in the session. Gold fell sharply, taking out last week’s low after the release of the job openings report.

Gold then rallied from its lows into the close on geopolitical risk buying due to the North Korean nuclear weapon news and Trump’s threatening response.