Investing.com – Wall Street traded lower on Tuesday as mounting geopolitical tensions surrounding Syria and North Korea sparked risk-off sentiment.
At 11:37AM ET (15:37GMT), the Dow Jones fell 90 points, or 0.44%, the S&P 500 lost 15 points, or 0.62%, while the Nasdaq Composite traded down 42 points, or 0.71%.
Pressure mounted Tuesday as South Korea's acting president warned on Tuesday of "greater provocations" by North Korea over concern of another military test in coming days, while a U.S. Navy strike group traveled to the region.
In response to the deployment, North Korea's state-run Korean Central News Agency quoted a foreign ministry spokesman as saying that the country would defend itself by "a powerful force of arms" against what it sees as any potential aggression by the United States.
But U.S. President Donald Trump seemed determined to show his resolve, declaring via Twitter early Tuesday that “North Korea was looking for trouble” and that the U.S. would resolve the issue with or without China’s help.
Markets also kept an eye on the rising geopolitical tension as foreign affairs ministers from the Group of Seven (G7) major global powers were joined by Middle East allies at their second day of meetings in Italy in the hopes of establishing a united front against Syrian President Bashar al-Assad.
The G7 is hoping to pressure Russian President Vladimir Putin to break ties with Assad, as U.S. Secretary of State was set to visit Moscow Wednesday in what would be his first diplomatic mission.
The Russian Foreign Ministry noted that Russia-U.S. relations were in their most difficult period since the cold war, although it was hoping for productive talks over both Syria and North Korea, according to reports from Interfax.
Mounting geopolitical tensions rippled through financial markets with the VIX, known as the fear gauge, spiking 12% on Tuesday as investors looked to buy downside protection for the S&P 500, hitting levels not seen since the November presidential elections.
Safe haven assets such as gold and 10-year Treasures saw prices spike with the precious metal breaking above its 200-day moving average and the yield on the benchmark U.S. debt, which moves inversely to prices, briefly falling below 2.3% to an intraday low of 2.293%.
In a light calendar day, the Job Openings and Labor Turnover Survey (JOLTS) for February revealed a continuing tightening of labor conditions with job openings hitting a seven-month high as employers continued to search for workers.
San Francisco Federal Reserve (Fed) Bank president John Williams repeated his call Tuesday that the U.S. central bank should raise interest three or four times this year and begin to trim the Fed's $4.5 trillion balance sheet in late 2017.
Minneapolis Fed president Neel Kashkari, the lone policymaker at the central bank to vote against the rate hike, was also scheduled for an appearance at 1:45PM ET (17:45GMT), although remarks from Fed chair Janet Yellen showed little change to her previous view that rate hikes should be gradual in order to allow “the economy to kind of coast” in order to avoid overheating.
"Whereas before we had our foot pressed down on the gas pedal trying to give the economy all the oomph we possibly could, now allowing the economy to kind of coast and remain on an even keel -- to give it some gas but not so much that we are pressing down hard on the accelerator -- that’s a better stance of monetary policy," she said.
Markets continued to price in the first rate hike for June with odds at around 55%, according to Investing.com’s Fed Rate Monitor Tool.
Meanwhile, oil prices pulled back from a five-week high on Tuesday, breaking a nearly week-long rally that had led to gains of more than 5% ahead of weekly data on U.S. inventories.
Market players looked ahead to the American Petroleum Institute’s weekly report on crude inventories at 4:30PM ET (20:30GMT) Tuesday.
Official government figures will be released on Wednesday amid expectations for a build of 0.316 million barrels.
U.S. crude futures lost 0.36% to $52.89 by 11:38AM ET (15:38GMT), while Brent oil traded down 0.54% to $55.68.