Stocks level out after North Korea-fueled slide

Last Updated Aug 11, 2017 5:09 PM EDT

Stocks rebounded slightly after two start days of losses amid rising tensions between the U.S. and North Korea.

The Standard & Poor's 500 index closed up 3 points, or 0.1 percent, at 2,441. The index on Thursday saw its biggest drop since mid-May. The Dow Jones industrial average gained 14 points, or .07 percent, to close at 21,858. The Nasdaq Composite Index added 39 points, or 0.6 percent, to 6,256.

Markets have a lot of ground to make up after an increasingly heated war of words between President Donald Trump and North Korea's leadership sent the markets into a tailspin. That conflict will continue to weigh on stocks, analysts believe.

"As markets head into the last session before weekend, the negative stint in global equities continues on the back of US-North Korea escalating tensions," TD Securities analysts said in a note.  

North Korea has made threats against the U.S. for years, but a recent military intelligence analysis found the country has developed the ability to build a small nuclear warhead that can reach the United States.

In unscripted remarks Tuesday night, Mr. Trump said he would bring "fire and fury" against North Korea if it didn't drop its threats. Two days later, he suggested his earlier comment "maybe wasn't tough enough," heightening investor concerns. 

The president continued tweeting on Friday, saying that military solutions to the crisis are "locked and loaded."

Of course, should the verbal conflict escalate to a military one, far more than the markets would be at stake. For now, Wall Street watchers seem doubtful that's in the cards. 

"[P]rovided that war is avoided, we doubt that this marks the start of a sustained downturn in the index," Capital Economics analysts wrote in a note. 

"There have been other instances since WW2 when the US has potentially been on the brink of a war that did not break out," it continued. Those instances -- like the Cuban Missile Crisis in 1962, or the downing of a spy plane in the Soviet Union in 1960 -- "typically had little lasting effect on the S&P 500."

-- The Associated Press contributed to this report