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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Ahead of Wall Street
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
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.
), Microsoft Corporation (NASDAQ:
), International Business Machines Corporation (NYSE:
) and AT&T, Inc. (NYSE:
) 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:
), NextEra Energy, Inc. (NYSE:
), Dominion Resources, Inc. (NYSE:
) and Southern Company (NYSE:
) went down 1.2%, 1.2%, 1.2% and 0.7%, respectively.