The major equity indexes ended the trading on Tuesday in positive territory after recovering from steep early losses triggered by fears that hostilities in the Korean Peninsula could escalate.

The S&P 500 fell as much as 0.66 percent after President Trump warned that all options are on the table for the United States to respond after North Korea fired a ballistic missile over a Japanese island in a new show of force.

The Street was relieved that the rift did not escalate further, with Trump’s focus on the devastation caused by Tropical Storm Harvey, which was the most powerful hurricane to strike Texas in 50 years when it made landfall last week.

The storm shuttered refineries across the energy hub in Texas but energy shares were little changed, with declines in oil services companies mostly offset by gains in refiners and some producers.

Shares of insurers fell on uncertainty over their storm-related liabilities. An index of industry stocks fell 0.5 percent to end at its lowest in two months.

Gains in the Nasdaq were led by the largest names, with Apple, Alphabet, Microsoft, Facebook and Amazon, the largest companies by market value, all higher.

Best Buy was down by 11.9 percent to $55.02 after the company warned its strong quarterly sales performance should not be seen as a new normal.

United Technologies rose 2.9 percent to $118.70 as it made progress in talks to acquire aircraft component manufacturer Rockwell Collins to bulk up its aerospace business. Rockwell’s shares rose 2.1 percent to close at $130.74.

Nike ended the trading day down 1.9 percent at $52.73, after Morgan Stanley cut its price target by $4, to $64.

Approximately 5.3 billion shares changed hands on the major domestic equity exchanges, as compared to the 5.9 billion share daily average over the past 20 trading sessions.

Consumer Confidence Up Sharply

Consumer confidence rose to a five-month high during August as households grew increasingly upbeat about the labor market even as housing prices continue to increase during June, suggesting a recent acceleration in consumer spending was likely to be sustained.

The data on Tuesday also supported views that economic growth would accelerate in the second half of the year after a sluggish performance earlier.

The Conference Board indicated that its consumer confidence index increased to a reading of 122.9 this month from 120.0 in July. That was the strongest reading since March when the index hit a 16-year high of 124.9. August was also the second highest reading since 2000.

The survey’s so-called labor market differential, derived from data about respondents who think jobs are hard to get and those who think jobs are plentiful, was the best in 16 years.

This measure closely correlates to the unemployment rate in the Labor Department’s employment report and is consistent with further absorption of labor market slack. The labor market is near full employment, with the unemployment rate at 4.3 percent.

Strong consumer confidence bodes well for consumer spending, which accelerated in the second quarter after slowing at the start of the year. It also provides a boost to the economy after it grew 1.9 percent in the first half of the year.

At the same time, the higher level of consumer optimism, together with the tightening labor market, were compelling reasons for the Federal Reserve to increase interest rates again this year despite worries about persistently low inflation.

It is expected that the Fed will announce a plan to start reducing its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities in September and hike rates in December.

The Conference Board survey showed consumers mildly upbeat about their short-term income prospects. The percentage of consumers expecting an improvement in their income rose slightly to 20.9 percent this month from 20.0 percent in July. The share expecting a drop fell to 7.8 percent from 9.5 percent in July.

Despite being near full employment, the labor market has struggled to generate strong wage growth, a frustration for both consumers and policymakers.

A second report on Tuesday showed the S&P CoreLogic Case-Shiller composite index of house prices in 20 metropolitan areas rose 5.7 percent in June on a year-over-year basis after a similar increase in May.

An acute shortage of homes on the market and strong demand are pushing up house prices. While rising house prices are boosting equity for homeowners, the dearth of properties is hurting home sales.

Crude Prices Fall

Crude prices were down more than 1.5 percent on Tuesday as the market contended with the shutdown of more than 16 percent of refining capacity in the United States, the result of Harvey that tore through the heart of the country’s oil industry.

Gasoline futures were up about 4.8 cents but were well off the two-year high of $1.7799 per gallon hit the previous day on news of the refinery closures.

Worries about refining capacity, or the lack of it, knocked crude prices lower despite disruptions in oil production elsewhere in the world. West Texas Intermediate was down 62 cents or 1.3 percent to $45.95 a barrel. International Brent crude futures LCOc1 were down 20 cents or 0.4 percent to $51.69 a barrel.

The discount for U.S. WTI versus Brent rose to almost $6 a barrel, its widest in more than two years.

Motiva Enterprises cut production at our largest refinery due to flooding within Port Arthur, Texas. Motiva has still not decided whether to shut down the refinery completely.

ExxonMobil was in the process of shutting its Beaumont, Texas refinery.

At least 3 million bpd of refining capacity is offline, or more than 16 percent of total U.S. capacity, based on company reports and Reuters estimates. The Gulf is home to nearly half of our domestic refining capacity.

The damage assessment could lead to more volatility. Some refineries were preparing for restarts, but heavy rains were expected to last through Wednesday, adding to catastrophic flooding in Houston.

The storm has set a rainfall record for tropical cyclones in Texas, the National Weather Service said.

Refineries in Europe and Asia were gearing up to replace the lost oil products, while the International Energy Agency said it could release emergency oil stocks in the event of extended outages.

Tropical Storm Harvey, which has been downgraded from a hurricane, hit oil refiners harder than crude producers. Barclays bank said in a note that the storm’s impact would “linger for several more weeks”. Crude markets were also eyeing disruptions in Libya and Colombia.

In Libya, militia pipeline blockades closed three oilfields and forced state-run National Oil Corp to declare force majeure at several sites.

In Colombia, a bomb attack by the leftist ELN rebel group halted pumping operations along the country’s second-largest oil pipeline.

Yet crude remains in ample supply. Jefferies bank said it was lowering its fourth-quarter Brent oil price estimates to $55 a barrel from $60 and its 2018 forecast to $57 from $64.

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