U.S. stocks drop, volatility jumps on Trump threat

U.S. stocks fell and a measure of equity volatility spiked higher after President Donald Trump delivered a warning to North Korea amid rising tensions between the nations. Treasuries slipped, while the yen strengthened.

The S&P 500 Index fell to session lows and the CBOE Volatility Index jumped 11 percent shortly before 3:30 p.m. in New York when Trump said further threats from the country would be met with “fire and fury.” The comments jolted markets from a summer slumber, with U.S. assets largely little changed for most of the session. The 10-year Treasury yield rose. Crude retreated toward $49 a barrel.

Trump’s comments followed a report in the Washington Post, citing a Defense Intelligence Agency analysis, that Pyongyang successfully developed a miniaturized nuclear warhead that could fit onto its missiles. He said North Korea will be “met with fire and fury and, frankly, power the likes of which the world has never seen before” if Kim Jong Un’s regime continues to threaten the U.S.

Source: Bloomberg Pro Terminal

Jr Trader Alexander Kumanov

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