North Korea's defense research institutes tested a major weapon system Friday, triggering an immediate risk-off rotation across global markets.
U.S. equity indices sold off sharply: the Dow Jones Industrial Average dropped 1.1 percent to $51,770, the S&P 500 fell 1.8 percent to $7,580, and the Nasdaq Composite fell 2.9 percent to $25,437. Technology stocks led the decline, with Nvidia dropping 4.2 percent and Alphabet falling 1.4 percent.
The geopolitical shock drove a pronounced flight to safety in fixed income. The 10-year Treasury yield fell 89 basis points as institutional investors rotated into duration. The yield curve flattened measurably, with short-term yields anchored by Fed policy expectations holding up better than longer-dated maturities—a classic risk-off pattern that signals investor concern over prolonged uncertainty.
Credit spreads widened 180 basis points on investment-grade corporates as investors demanded higher risk premiums for holding corporate debt over sovereign securities. The rotation out of credit into Treasuries reflected a sharp recalibration of capital allocation toward capital preservation and reduced duration exposure.
The dollar strengthened as a traditional safe-haven asset, while gold rallied on demand for store-of-value hedges.
