Geopolitical Concerns Contribute To Sell-Off On Wall Street - U.S. Commentary

(RTTNews) - Following the strength seen last week, stocks moved sharply lower over the course of the trading session on Tuesday. With the steep drop on the day, the tech-heavy Nasdaq pulled back well off the record closing high set last Friday.

The major averages ended the day firmly in negative territory but off their lows of the session. The Dow plunged 234.25 points or 1.1 percent to 21,753.31, the Nasdaq tumbled 59.76 points or 0.9 percent to 6,375.57 and the S&P 500 slumped 18.70 points or 0.8 percent to 2,457.85.

The pullback on Wall Street partly reflected geopolitical concerns following news North Korea conducted a major nuclear test on Sunday.

President Donald Trump condemned the nuclear test in posts on Twitter, saying North Korea's words and actions continue to be very hostile and dangerous to the U.S.

Trump said the U.S. is considering stopping all trade with any country doing business with North Korea in response to the test.

Traders also kept an eye on any developments in Washington, as lawmakers returned following the August recess.

Lawmakers are under pressure to raise the debt ceiling and pass a government spending bill before deadlines at the end of the month.

Selling pressure may have been generated by concerns about the economic impact of Trump's decision to end a program offering protections for undocumented immigrants known as Dreamers.

On the U.S. economic front, the Commerce Department released a report showing a sharp pullback in factory orders in the month of July.

The Commerce Department said factory orders plunged by 3.3 percent in July after surging up by an upwardly revised 3.2 percent in June.

Economists had expected orders to tumble by 3.2 percent compared to the 3.0 percent jump originally reported for the previous month.

Sector News

Financial stocks saw substantial weakness on the day due to the geopolitical concerns, with the NYSE Arca Broker/Dealer Index and the Dow Jones Banks Index tumbling by 2.8 percent and 2.5 percent, respectively.

With the steep drops during the session, both the broker/dealer index and the banks index fell to their lowest closing levels in over two months.

Significant weakness was also visible among telecom stocks, as reflected by the 2.6 percent slump by the NYSE Arca Telecom Index. The index dropped to its lowest closing level in over a year.

Chemical, networking, and semiconductor stocks also saw considerable weakness, while oil service and gold stocks bucked the downtrend on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. Japan's Nikkei 225 Index slid by 0.6 percent, while China's Shanghai Composite Index edged up by 0.2 percent.

The major European markets also ended the day mixed. While the German DAX Index rose by 0.2 percent, the French CAC 40 Index dipped by 0.3 percent and the U.K.'s FTSE 100 Index fell by 0.5 percent.

In the bond market, treasuries moved sharply higher amid the geopolitical concerns. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled by 8.7 basis points to a nearly ten-month closing low of 2.070 percent.

Looking Ahead

Any additional international news could impact trading on Wednesday, although traders are also likely to keep an eye on the Institute for Supply Management's report on service sector activity in the month of August.

The Federal Reserve is also due to release its Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts.