Economist's Insights

Yesterday’s Trading Activity – Fear Subsides as Early Morning Moves Moderate

Aug 9, 2017

Early morning anxiety tied to the recent war of words between the heads of the U.S. and North Korea let up throughout Wednesday’s session. Stocks trimmed morning losses and Treasury yields moved off of session lows. However, gold remained well bid through the close. The Dow fell 0.2% and the S&P managed its way back to essentially unchanged (-0.04%). As a result of the ebbing fears, the VIX index, which tracks expectations of future equity volatility, closed at its daily lows after spiking earlier to the highest level in more than a month. Treasury yields climbed back from a steep morning drop that pushed yields (prices) to their lowest (highest) levels since late June. The 10-year Treasury yield fell 1.4 bps to 2.25% after dropping to as low as 2.21% shortly after 7 a.m. CT. Nonetheless, gold climbed to close at the highest level since June 8. The mixed response between asset classes followed mixed messaging about North Korea from high-level officials in the Trump Administration. Secretary of State Tillerson tried to calm the waters saying, “Americans should sleep well at night, have no concerns about this particular rhetoric of the last few days”. Defense Secretary Mattis, however, took a more hardline approach, commenting that North Korea “should cease any consideration of actions that would lead to the end of its regime.”