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Stocks close little changed as North Korea tension rises again

CNBC logo CNBC 9/22/2017 Thomas Franck

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Stocks ended little changed Friday amid rising geopolitical tensions with North Korea.

North Korean Minister of Foreign Affairs Ri Yong Ho said Thursday that the country may consider testing a hydrogen bomb in the Pacific Ocean. If successfully conducted, the test would be North Korea's first nuclear test beyond its borders.

The Dow slipped 9 points, with Apple posting its worst week in more than a year. The S&P 500 and Nasdaq indexes closed just above the flatline.

The rising geopolitical tensions left investors uneasy heading into the weekend, said Art Hogan, chief market strategist at Wunderlich Securities.

"The path of least resistance is probably to lighten up today because of that. From both sides the rhetoric is rising," he said. "As hard as that is to put number to it certainly doesn't give investors a sense of security. And I think that's probably a big focus for today."

Rhetoric between the United States and North Korea escalated this week as North Korean leader Kim Jong Un criticized U.S. President Donald Trump, calling the president's United Nations address earlier this week "unprecedented rude nonsense."

Trump responded in kind on Twitter, calling Kim "a madman who doesn't mind starving or killing his people."

Despite the political sparring, the global market reaction was subdued. The Stoxx Europe 600 index rose 0.03 percent after falling in earlier while Asian markets closed mostly in the red. Hong Kong's Hang Seng fell 0.8 percent, the South Korean the Kospi fell 0.7 percent.

Apple shares continued to drag on markets, falling 1.5 percent. The stock has dropped 5.5 percent since Monday. Many people believe the stock's slip is spurred by poor reviews of the company's new iPhone 8 and Apple Watch products. Despite the stock's recent performance, it remains up 32 percent since January.

On the flip side, shares of Boeing added 0.63 percent as the dispute the company and its Canadian rival, Bombardier, heats up. The two are battling over a potential defense sale worth about $5 billion.

Aerospace and defense stocks have surged this week amid rising global tensions. Shares of Orbital ATK and Aerojet Rocketdyne traded 0.14 percent and 4.6 percent higher respectively. Both companies are up about 20 percent since Monday.

The geopolitical tensions eclipsed investor attention to end the week after the Federal Reserve hinted Wednesday that a final rate hike in December remains likely. The majority of voting members indicated that they still foresee an increase by year's end.

Inflation measures have remained largely unimpressive recently, keeping investors skeptical of an additional hike this year. The core personal consumption expenditures (PCE) price index, the Fed's preferred inflation measure, increased 1.4 percent in the 12 months through July. The metric has consistently missed the U.S. central bank's 2 percent target for the past five years.

But looking ahead to next week, all eyes will be fixed on the PCE's latest reading said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Company.

"Anything that gives us a hint of what inflation looks like. That's the big data point," he said. "Each and every central bank around the globe is talking about tapering or ending quantitative easing."

The yield on the 10-year Treasury note fell slightly Friday to 2.253 percent after posting a strong rebound in recent weeks. Since lows around 2.02 percent two weeks ago, the yield on the 10-year has added more than 23 basis points over the period, notching further gains after the Fed announcement Wednesday.

Havens got a boost following the exchange. The Japanese yen gained 0.4 percent and the Swiss franc gained 0.2 percent against the dollar while gold futures climbed more than 0.3 percent. The dollar index continued to shed gains from earlier this week, down 0.3 percent.

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