Missile tests weigh on global stocks
NEW YORK » Concerns over North Korea's nuclear ambitions and record oil prices sent stocks lower yesterday and added to Wall Street's worries about the economy and interest rates.
After North Korea test fired a seventh missile yesterday, stocks around the globe sagged as investors worried that tensions between North Korea and the United States could intensify.
Nervousness about North Korea's actions, along with concerns about gasoline supplies, pushed crude oil futures to a new intraday record of $75.40 per barrel before they retreated slightly. A barrel of light crude set a settlement record of $75.19, up $1.26, on the New York Mercantile Exchange.
With the U.S. economy still strong -- a report on factory orders out yesterday was stronger than expected -- investors worrying about interest rates remained hesitant to buy stocks. The Labor Department's report on June employment due tomorrow added to the market's hesitancy, since a strong report could encourage the Fed to continue raising interest rates.
"Investors aren't really looking for opportunities to get in. They're looking for reasons to get out," said Scott Wren, equity strategist for A.G. Edwards & Sons. "I read the Fed statement last week as dovish, but with that employment report coming up, nobody wants to get into the market in front of that."
The Dow Jones industrial average fell 76.20, or 0.68 percent, to 11,151.82, after gaining 77.80 in holiday-shortened trading Monday.
Broader stock indicators also fell sharply. The Standard & Poor's 500 index lost 9.28, or 0.72 percent, to 1,270.91, and the Nasdaq composite index fell 37.09, or 1.69 percent, to 2,153.34.
Bonds fell sharply, exacerbating the drop in stocks. The yield on the 10-year Treasury note shot up to 5.22 percent from 5.15 percent late Monday. The dollar made gains against most major currencies, while gold prices moved higher as well.
Overseas, Japan's Nikkei stock average dropped 0.73 percent on news of the Korean missile launch. In Europe, Britain's FTSE 100 closed down 0.97 percent, France's CAC-40 slid 1.26 percent for the session, and Germany's DAX index tumbled 1.8 percent.
A Commerce Department report on factory orders did little to assuage Wall Street. Orders rose by a solid 0.7 percent in May, recovering from a 1.8 percent drop the prior month. Economists had expected orders to rise just 0.1 percent. The report could signal an economy robust enough to withstand further interest rate hikes -- something Wall Street had hoped to avoid.