U.S. stocks fell, joining a broad-based global equity decline as the global markets dialed back risk appetites on the increased tension between the U.S. and North Korea. Technology and financial issues led the drop, followed closely by consumer discretionary stocks as uneasiness toward the retail sector remains despite better-than-expected earnings results from Kohl’s and Macy’s. In economic news, wholesale price inflation came in cooler than estimated, gold was higher and Treasury yields, crude oil prices and the U.S. dollar were lower.

The Dow Jones Industrial Average (DJIA) declined 205 points (0.9%) to 21,844, the S&P 500 Index lost 36 points (1.4%) to 2,438, and the NASDAQ Composite tumbled 135 points (2.1%) to 6,217. In moderate to heavy volume, 859 million shares were traded on the NYSE and 2.2 billion shares changed hands on the NASDAQ.  WTI crude oil decreased by $0.97 to $48.59 per barrel and wholesale gasoline was unchanged at $1.62 per gallon. Elsewhere, the Bloomberg gold spot price was $8.25 higher at $1,285.55 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—traded 0.2% lower at 93.40. The Producer Price Index (PPI) showed prices at the wholesale level in July were down 0.1% month-over-month (m/m), versus the Bloomberg expectation to match June’s 0.1% increase. The core rate, which excludes food and energy, also dipped 0.1%, compared to forecasts of a 0.2% advance and June’s unrevised 0.1% increase. Y/Y, the headline rate was 1.9% higher, below projections of a 2.2% increase, and the core PPI rose 1.8% last month, missing estimates of a 2.1% gain. In June, producer prices were 2.0% higher and up 1.9% for the headline and core rates, respectively.

Tomorrow, the economic calendar will culminate with the highly-anticipated release of the Consumer Price Index, projected to show a 0.2% m/m increase in prices at the headline level for July, after being flat in June, while the core rate is also expected to increase 0.2% after the prior month’s 0.1% gain. Compared to last year, prices are forecasted to be 1.8% higher, up from June’s 1.6% rise, and core inflation is estimated to remain at the prior month’s 1.7% pace. Core prices are anticipated to post the third-straight month below the Fed’s 2.0% target, but the markets continue to expect the Central Bank to raise rates one more time this year and begin the process of shrinking its behemoth $4.5 billion balance sheet.

Weekly initial jobless claims rose by 3,000 to 244,000 last week, above forecasts of 240,000, with the prior week’s figure being revised higher by 1,000 to 241,000. The four-week moving average declined by 1,000 to 241,000, while continuing claims decreased 16,000 to 1,951,000, south of estimates of 1,960,000.

Treasuries traded higher, with the yield on the 2-year note slipping 1 basis point (bp) to 1.33% and the yields on the 10-year note and the 30-year bond dipping 4 bps to 2.20% and 2.78%, respectively.

Schwab Center for Financial Research – Market Analysis Group

©2017 Charles Schwab & Co., Inc., Member SIPC. All rights reserved.

Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.