U.S. stocks closed lower on Tuesday after President Donald Trump warned North Korea, saying that threats will be "met with fire and fury."
Trump made his remarks just hours after revelations Pyongyang has successfully created a miniaturized nuclear weapon designed to fit inside its missiles.
"The geopolitical tensions could be the catalyst for the market's direction in the next coming weeks depending on how it all shakes out," said Robert Pavlik, chief investment strategist at Boston Private. "If those talks keep escalating, the market will get nervous."
"I think the muted reaction in the market has to do with Trump not necessarily following up on his tough talk," Pavlik said.
The Dow Jones industrial average briefly fell more than 60 points before closing 33.08 points lower at 22,085.34. The 30-stock index snapped a 10-day winning streak and a streak of nine straight record closes.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, popped nearly 11 percent to 11.02.
The S&P 500 closed 0.24 percent lower at 2,474.92, with materials leading decliners. The index, along with the Dow, notched an intraday record earlier in the session. The S&P broke above its previous intraday high of 2,484.04, propelled by earlier gains in financials and tech.
Jeremy Klein, chief market strategist at FBN Securities, said financials received a boost from a rise in yields earlier in the session.