Stocks plunge then rally as Trump calls off North Korea summit

Blue chip stocks on Wall Street plunged more than 290 points after President Donald Trump called off the planned June 12 summit with North Korea. Though the market rallied in the rest of the session, it remained in the red. 

News of the cancelled summit came within 30 minutes of the stock market’s opening. Investors had hoped the summit would ease tensions between the two countries and bring some stability to the Korean Peninsula. 

Mr Trump cited “open hostility” from the North Korean regime, describing the failed summit as a “missed opportunity” and a “truly sad moment in history.” However, he held open the possibility that the summit could still take place.

Meanwhile, more sanctions are being considered against Pyongyang. Mr Trump also said US forces were “ready if necessary” and that he had spoken to South Korean and Japanese officials about a military response “if such an unfortunate situation is forced upon us.”

Volatile personalities, stocks
“They’re both volatile personalities,” says Larry Peruzzi, managing director of international equity trading at Mischler, referring to President Trump and North Korean leader Kim Jong Un. “Maybe [the markets] should’ve expected something like this to happen. We were overly optimistic.”

The Dow Jones Industrial Average declined 75.05 points, or 0.3%, to 24,811.76. The S&P 500 fell 0.2% to 2727.76 while the Nasdaq Composite eased less than a point to 7424.43.

Stocks generally remain volatile as they react to worries of runaway inflation, rising interest rates, a global trade war and continuing geopolitical tensions.

A strong first-quarter earnings season did little to reinvigorate the stock market.

“The market has a problem trying to punch through 25,000,” Mr Peruzzi says of the Dow. “It’s going to take something else to get us through that. We haven’t found it yet.”

Oil continues fall
Energy stocks extended their decline in the S&P 500, falling 1.7%, the most of any other sector in the broad index. A drop in oil prices had already pushed stocks lower but the decline worsened after the summit cancellation.

Brent crude, the global oil benchmark, was 1.3% lower at $US78.79 a barrel after having hit $80.50 last week, its highest level since November 2014. US crude futures traded down 1.6% at $US70.70 a barrel.

Shares of Exxon Mobil fell 2.3%, while Chevron declined 1.6%.

Wall Street will be closed on Monday for the Memorial Day holiday.

US government bond prices rose and yields fell as investors reassessed Wednesday’s release of dovish minutes from the Federal Reserve’s May meeting. The yield on the benchmark 10 year Treasury note fell to 2.964% from 3.003% on Wednesday.

Auto stocks in Germany and Japan came under pressure after reports that the Trump administration was considering new tariffs of up to 25% on imported vehicles and auto-parts. Japan’s Nikkei Stock Average fell 1.1%, while the Stoxx Europe 600 auto sector fell 1.8%.

Shares of BMW, Volkswagen and Daimler fell more than 1.5%. The companies generate 17%, 15% and 25% respectively of their revenue in the US.

Germany’s DAX fell 0.9% and the Stoxx Europe 600 dropped 0.5%. France’s CAC 40 eased 0.3% and the UK’s FTSE 100 lost 0.9%.