Stocks, Dollar Decline Amid Korean Tensions, Jobs: Markets Wrap

(Bloomberg) -- A flareup of tension on the Korean peninsula damped demand for risk assets ahead of the weekend, offsetting fresh signs of strength in the world's largest economy.

The S&P 500 Index halted an eight-day rally, paring a weekly gain to 1.2 percent. The yen rose versus the dollar on speculation North Korea may test a missile at the same time the U.S. president ratcheted up rhetoric against the rogue nation. Gold turned higher.

The sabre rattling threatened to overshadow the latest U.S. jobs report, which brought the first decline in hiring since 2010 because of the hurricanes, but also a spike in hourly wages that bolstered the odds for tighter monetary policy.

Earlier, data showing a spike in U.S. wages added optimism in the economy and sent the dollar to a two-month high. The 10-year Treasury yield spiked to near 2.40 percent before falling back four basis points. West Texas crude sank about 3 percent.

“People are taking their money off the table. It's common to see traders flatten out their positions,” said Tom Mangan, senior vice president of James Investment Research in Xenia, Ohio, which oversees about $6 billion. “The economy is doing fine, and the only real concern that we see are exogenous things like North Korea, or a major mistake in trade policy.”

Signs that the global economy continues to strengthen had underpinned demand for stocks and the dollar, and weighed on Treasuries. The rise in hourly wages added to speculation that inflation may be picking up and led the market to further price in a hike by the Federal Reserve in December. The central bank has signaled it intends to raise rates one more time this year amid growing signs the economy is picking up steam.

Read here why a better look at the data will be coming on Oct. 20.

Terminal subscribers can read more in our Markets Live blog.

Here are the main moves in markets:

Stocks

• The S&P 500 Index fell 0.1 percent to 2,549.33 at 4 p.m. in New York.
• The Nasdaq 100 Stock Index rose 0.1 percent.
• The Dow industrial index dropped 2 points to 22,773.67, first decline in eight days.
• The CBOE Volatility Index rose 4 percent after closing at a record low Thursday.
• The Stoxx Europe 600 Index sank 0.4 percent.
• The MSCI Emerging Market Index was little changed.

Currencies

• The Bloomberg Dollar Spot Index was steady after hitting the highest in more than 11 weeks.
• The euro erased losses, rising 0.2 percent to $1.1728.
• The yen rose 0.2 percent at 112.65 per dollar, erasing a decline of 0.6 percent.

Bonds

• The yield on 10-year Treasuries advanced two basis points to 2.37 percent, after touching the highest in more than 12 weeks.
• Germany's 10-year yield rose less than one basis point to 0.46 percent.

Commodities

• West Texas Intermediate crude decreased 3 percent to settle at $49.29 a barrel.
• Gold rose 0.5 percent to $1,274.50 an ounce, after falling as much as 0.6 percent.

--With assistance from Alexandria Arnold and Lu Wang

To contact the reporter on this story: Randall Jensen in New York at rjensen18@bloomberg.net.

To contact the editor responsible for this story: Jeremy Herron at jherron8@bloomberg.net.