Escalating political tension between Ukraine and Russia over the Crimean region dragged the benchmarks down to their worst selloffs in about a month. Concerns that the movement of Russian troops in the Crimean region of Ukraine may lead to larger conflict saw investors moving to the safe havens. Encouraging reports on ISM Manufacturing Index, construction spending and personal income failed to lift sentiment as investors remained focused on the political standoff over Ukraine.
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The Dow Jones Industrial Average (:DJI) plunged 0.9% to close Monday’s trading session at 16,168.03. The Standard & Poor (S&P 500) fell 0.7% to finish at 1,845.73. The tech-laden Nasdaq Composite Index too declined 0.7% to 4,277.30. The fear-gauge CBOE Volatility Index (:VIX) surged 14.3% to settle at 16. Total volume on the New York Stock Exchange was 3.4 billion shares. Advancing stocks were outnumbered by declining stocks on the NYSE. For 33% stocks that advanced, 63% declined.
Investors were left unnerved after Russian troops increased their presence in Crimea, located in Southern Ukraine. The Ukrainian authorities described this action as an ‘invasion’. The Russians also reportedly gave the Ukrainian troops an ultimatum to surrender or ‘face a storm’. These developments dragged markets to their lowest point in a month as investors pulled money from equities and invested them in traditional safe-haven assets. However, Russia’s Ministry of Defense denied giving such ultimatum.
Coming to the domestic front, the rise in ISM Manufacturing Index failed to boost investor confidence. The Institute for Supply management reported its February PMI had increased 1.9 percentage points from January’s adjusted reading of 51.3% to 53.2%. The rise to 53.2% in February was better than economists’ expectation of an increase to 51.9%.
Favorable reports on construction spending and personal income also failed to instill confidence among investors. The US Census Bureau of the Department of Commerce reported a 0.1% rise in construction spending from revised December estimate of $941.9 billion to $943.1 billion in January. This increase in the payout by builders on residential and nonresidential structures was in sharp contrast to consensus estimate of a 0.5% drop.
According to the Bureau of Economic Analysis, personal income increased 0.3% in January, more than the consensus estimate of a 0.2% gain. This rise in personal income came after it had declined about 0.1% in December. Also, personal consumption expenditure increased 0.4% in January, more than the consensus estimate of 0.1%. It also rose more than the growth of 0.1% in December’s personal consumption expenditure.
All the ten sectors of the S&P 500 ended in red. The Technology Select Sector SPDR (XLK) dropped the most as the sector fell 1.1%. Stocks from the sector such as Google Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), International Business Machines Corporation (NYSE:IBM) and AT&T, Inc. (NYSE:T) dropped 1.1%, 1.4%, 0.5% and 0.2%, respectively.
The Utilities sector closely followed the Technology sector. The Utilities Select Sector SPDR (XLU) decreased 0.9%. Stocks from the sector such as Duke Energy Corporation (NYSE:DUK), NextEra Energy, Inc. (NYSE:NEE), Dominion Resources, Inc. (NYSE:D) and Southern Company (NYSE:SO) went down 1.2%, 1.2%, 1.2% and 0.7%, respectively.
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