Investing.com – U.S. stocks closed sharply lower on Tuesday, as geopolitical uncertainty in the Korean peninsula continued to fuel safe-haven demand, weighing on investor appetite for risk.
The Dow Jones Industrial Average closed lower at 21,753. The S&P 500 closed 0.75% lower while the Nasdaq Composite closed at 6375.57, down 0.93%.
In what was the first day of the U.S. trading week, following the Labor Day holiday Monday, investors fled risk assets in search of safe havens like gold and the yen as tensions between the U.S. and North Korea remained elevated, following a nuclear weapons test in Pyongyang over the weekend.
North Korea successfully tested a hydrogen bomb that can be mounted onto an intercontinental ballistic missile. This was North Korea's sixth nuclear test since 2006 and its most powerful to date.
Also adding to negative sentiment in U.S. stocks was a sharp sell off in Financials, mostly banks, amid a drop in expectations of a third rate hike later this year, following dovish comments from Fed officials on Tuesday.
Minneapolis Federal Reserve Bank President Neel Kashkari said the Federal Reserve’s recent interest rate hikes may be slowing inflation and inflicting “real harm” on U.S. economic growth.
"Maybe our rate hikes are actually doing real harm to the economy," said Kashkari.
Kashhkari's comments came a few hours after Federal Reserve Governor Lael Brainard urged the U.S. central bank to delay raising interest rates until the trend of slowing inflation improved.
The dovish tone on monetary policy from the two Fed officials comes ahead of the Federal Reserve Open Market Committee (FOMC) meeting slated for Sept. 20.
'Bulls and Bears' on Wall Street
The top Dow gainers for the session: Wal-Mart Stores Inc (NYSE:WMT) up 1.8%, Home Depot Inc (NYSE:HD) up 1.4% and Exxon Mobil Corporation (NYSE:XOM) up 0.8%
United Technologies Corporation (NYSE:UTX) down 5.7%, The Travelers Companies Inc (NYSE:TRV) down 3.7% and Goldman Sachs Group Inc (NYSE:GS) down 3.6%, were among the worst Dow performers of the session.