The S&P 500 index ended Thursday with its largest one-day drop since May 17 as investors fled riskier assets in response to an exchange of threats between the United States and North Korea.

Equities steepened their losses late in the session after President Trump said his earlier warnings to North Korea may not have been tough enough. He also said the nuclear-armed nation should be “very, very nervous” if it even thinks about attacking the United States or its allies.

Trump was responding to North Korea’s claim it was completing plans to fire four intermediate-range missiles over Japan to land near the U.S. Pacific territory of Guam. Investors have been jittery about North Korea since Tuesday when Trump said any threats from Pyongyang would be “met with fire and fury like the world has never seen.”

The last time the S&P closed down more than 1 percent was May 17 when it fell 1.8 percent. It is now on track for its biggest weekly drop since the week before the Nov. 8 election.

The technology sector was the S&P’s largest drag with a 2.2 percent decline. It has been the leading S&P gainer, making it particularly vulnerable to a decline.

Investors instead turned to safe-haven assets such as gold, pushing it to a two-month high.

The utilities index, often seen as a bond proxy because of its companies’ slow reliable growth and high dividends, was the only S&P sector that ended the day up, showing a 0.25 percent gain.

The CBOE Volatility Index closed at its highest since the election.

Macy’s ended the trading day lower by 10.2 percent and Kohl’s fell almost 6 percent as the companies continued to report a drop in quarterly same-store sales, stoking concerns that their turnarounds may still be a long way off.

Approximately 7.5 billion shares changed hands on the major domestic equity exchanges, a number that was well above the 6.25 billion share daily average for the past 20 trading days.

PPI Down Sharply

The Labor Department reported Thursday morning that the producer price index (PPI) fell 0.1 percent last month, weighed down by decreasing costs for services and energy products which declined unexpectedly during July. It was the largest drop since August 2016 and reversed June’s 0.1 percent gain.

In the 12 months through July, the PPI increased 1.9 percent after rising 2.0 percent in the year through June.  and was one more indication that the ongoing moderation in inflation could delay a Federal Reserve interest rate increase.

Although the link between the PPI and the consumer price index has weakened, last month’s drop-in producer prices could worry Fed officials who have long argued that the moderation in inflation was temporary.

Fed Chair Janet Yellen told lawmakers last month that “some special factors” were partly responsible for the low inflation readings. Inflation, which has remained below the U.S. central bank’s 2 percent target for five years, is being watched for clues on the timing of the next Fed interest rate increase.

Last month, prices for services fell 0.2 percent, the first decline since February. That accounted for more than 80 percent of the decrease in the PPI. Services were weighed down by a 0.5 percent drop in the index for final demand trade services. Services had increased for four straight months.

The cost of healthcare services rose 0.3 percent after being unchanged in June. Those costs feed into the Fed’s preferred inflation measure, the core personal consumption expenditures price index.

Energy prices fell 0.3 percent, declining for a third straight month. Food prices were unchanged in July following a 0.6 percent jump in the prior month.

A key gauge of underlying producer price pressures that excludes food, energy and trade services was unchanged last month. The so-called core PPI gained 0.2 percent in June.

Core goods prices fell 0.1 percent in July after increasing for eight straight months. The core PPI increased 1.9 percent in the 12 months through July after advancing 2.0 percent in June.

Unemployment Claims Up Slightly

The number of claims for unemployment benefits increased slightly last week. The trend in weekly jobless claims, however, remained consistent with a tightening labor market. According to a report released Thursday morning by the Labor Department, initial claims for state unemployment benefits increased by 3,000 claims to seasonally adjusted 244,000 claims for the week ended Aug. 5.

With the labor market near full employment, there is probably limited room for claims to continue declining. Claims have now been below 300,000, a threshold associated with a healthy labor market, for 127 straight weeks. That is the longest such stretch since 1970, when the labor market was smaller. The unemployment rate is 4.3 percent.

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