Trump's warning to North Korea spooks U.S. stocks

USA-STOCKS/

U.S. stocks closed lower on Tuesday after a late afternoon selling spree as investors fled for safety after U.S. President Donald Trump vowed to respond aggressively to any threats from North Korea.

After scaling back from record highs earlier in the session, Wall Street's three major indexes dipped after Trump said North Korea "will be met with fire and fury" like the world has never seen if it threatens the United States.

"Trump's response was aggressive and that's why the market turned lower," said Ken Polcari, Director of the NYSE floor division at O’Neil Securities.

Japan said on Tuesday it was possible that North Korea had already developed nuclear warheads and warned of an acute threat posed by its weapons programs as Pyongyang's continues missile and nuclear tests in defiance of U.N. sanctions.

Investors, who took the North Korea report from Japan in their stride earlier in the day, lost their appetite for risk after Trump's comments to reporters during his vacation at his golf club in New Jersey.

The Dow Jones Industrial Average ended down 33.08 points, or 0.15 percent, at 22,085.34, snapping a 9-day streak of closing records.

The S&P 500 lost 5.99 points, or 0.24 percent, to close at 2,474.92 and the Nasdaq Composite .IXIC dropped 13.31 points, or 0.21 percent, to 6,370.46.

The CBOE Volatility Index, better known as the VIX and the most widely-followed barometer of expected near-term stock market volatility, closed at 10.96, its highest in about a month.

Ten out of the 11 major S&P 500 sectors ended lower after the comments with the only gains seen in the utilities sector, which is seen as a bond proxy because of its slow but predictable growth and dividends.

Utilities closed up 0.3 percent while the materials sector .SPLRCM was the S&P's biggest loser with a 0.9-percent drop.

Trading volume also picked up in the late afternoon of what had been a sleepy summer session while the U.S. Congress is expected to be in recess until Sept 5.

The S&P hasn't moved more than 0.5 percent in one day since July and has fallen more than 1 percent only twice this year.

The financial sector index .SPSY gave back gains after news California insurance regulator will probe whether Wells Fargo & Co and an insurance company harmed residents by selling insurance they did not need. Wells Fargo still ended up 0.3 percent at $52.71.

Shares of Michael Kors ended up 21.5 percent, after the luxury goods maker raised its full-year revenue forecast.

NYSE declining issues outnumbered advancers 1.73-to-1; on Nasdaq, a 1.47-to-1 ratio favored decliners.

About 6.22 billion shares changed hands on U.S. stock exchanges, slightly above the 6.15 billion average for the last 20 sessions.

Additional reporting by Saqib Ahmed in New York and Tanya Agrawal in Bengaluru; Editing by Sriraj Kalluvila and Nick Zieminski.