Dow Jones Industrial Average: 20,651.30 (-6.72, -0.03%)
Reflects changes in 30 well-known stocks (e.g. Apple, General Electric, IBM, Exxon Mobil). Daily movements of +/- 100 points are considered to be large.
S&P 500: 2,353.78 (-3.38, -0.14%)
Reflects changes in 500 stocks that includes large companies across all sectors. Because it consists of so many diverse companies, it is considered one of the best representations of how the stock market is doing. Daily movements of +/- 10 points are considered to be large
NASDAQ: 5,866.77 (-14.15, -0.24%)
Reflects changes in an index of more than 3,000 stocks that consists mainly of technology companies. Stocks such as Google, Amazon.com, and Microsoft are traded on the NASDAQ. Daily movements of +/- 30 points are considered to be large.
Geopolitical concerns sent stocks lower, although they finished well off of their lows…
Markets fell on Tuesday driven by concerns around further U.S. strikes in Syria as well as fresh worries over North Korea who warned of a nuclear attack on the United States if provoked.
Why do we care? For obvious reasons! But, from the stock market’s perspective the uncertainty and nervousness around foreign policy is a negative for the stock market. As previously discussed in Coherent Finance, some select stocks and sectors can benefit from these types of headlines (i.e. the Energy sector can benefit from geopolitical tensions out of regions where oil is produced, such as the Middle East). In fact, Gold stocks went up significantly on Tuesday, since Gold is a hard asset (unlike stocks) and therefore considered a safe haven. It will be important to keep an eye on further developments on the geopolitical front as any new headlines or concerns will lead to market volatility.
Interest rates fell again to multi-month lows…
The geopolitical tensions and concerns over US economic data caused the 10-year US Treasury note to close at its lowest yield in more than 4 months.
Why do we care? Similar to Gold (discussed above) which is considered a safe haven, when investors get nervous they flock into other types of safe assets such as Treasury bonds. These are considered safe because they are backed by the US government, and therefore considered risk-free (i.e. the US government could always print money to pay back the bond). Bond prices and yields move inversely, so when investors buy bonds, yields go down which occurred on Tuesday.
Also, many stocks are affected by interest rates. For example, lower interest rates are considered a negative for the financial sector since the rate at which they can lend money is now lower. Specifically, the S&P Financial sector was down 0.30% on Tuesday.