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 News that Ukraine mobilized for war on Sunday and Washington
threatened to isolate Russia economically overshadowed
better-than-expected U.S. data, including an index showing that
factory activity rebounded from an eight-month low in February.
The S&P 500 had closed at a record high on Friday, and profit-taking
was expected on Wall Street due to the political uncertainty. The
index found some support when it fell to 1,840, but broke below it
after the first attempt. The S&P 500 extended losses in early
afternoon trading and then recovered slightly to close above the
support level.
"It's too early to tell whether this would be a buying opportunity
because we need to see how this (tension between Ukraine and Russia)
plays out. It depends on how far this escalates, but I would suggest
hedging before making any bets at this point," said Randy Frederick,
managing director of active trading and derivatives for Charles
Schwab in Austin, Texas.
The CBOE Volatility Index <.VIX>, also known as the VIX, shot up
14.29 percent, its biggest one-day jump in a month, to end at 16.
The VIX, which generally moves inversely to the S&P 500, is used to
hedge against the market's further decline. The VIX is also regarded
as Wall Street's barometer of fear.
The Dow Jones industrial average <.DJI> fell 153.68 points or 0.94
percent, to end at 16,168.03. The S&P 500 <.SPX> slid 13.72 points
or 0.74 percent, to finish at 1,845.73. The Nasdaq Composite <.IXIC>
dropped 30.818 points or 0.72 percent, to close at 4,277.301.
Russian stocks and bonds fell sharply and the central bank raised
interest rates to defend the ruble. The MICEX index <.MCX> of Moscow
stocks tumbled 10.8 percent and the dollar-denominated RTS <.IRTS>
stock index dropped 12 percent.
The market rout highlighted the damage the crisis could do to
Russia's vulnerable economy, making it harder to balance the budget
and potentially undermining business and public support for Putin.
In U.S. trading, the Market Vectors Russia ETF <RSX.P> fell as much
as 9 percent in heavy volume to a 4-1/2 year low of $22.16. It ended
down 6.8 percent at $22.76.
But the Direxion Daily Russia Bear 3x ETF <RUSS.P>, a leveraged play
on bad news that could affect the fortunes of the nation's listed
stocks, jumped 21 percent to $20.98.
Energy stocks could lose if relations between the United States and
Russia deteriorate further.
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"Anything that involves a boycott of Russian supplies, which are
very significant, could impact the energy sector dramatically," said
Rick Meckler, president of investment firm LibertyView Capital
Management in Jersey City, New Jersey.
"In situations like this, you see very quick reactions reverse as
people understand the scenario and how things play out."
Brent crude prices rose $2.13 to settle at $111.20 per barrel while
U.S. crude prices gained $2.33 to end at $104.92 a barrel. The S&P
energy sector index <.SPNY>, which opened higher, closed down 0.6
percent.
Gold prices hit a four-month high as investors sought safe-haven
assets, boosting gold stocks. U.S.-traded AngloGold Ashanti <AU.N>
shares gained 2.2 percent to $17.96.
Although the focus was on Ukraine, the economic calendar was busy on
Monday. U.S. factory activity rebounded from an eight-month low in
February, according to the Institute for Supply Management, while
the Commerce Department said consumer spending rose more than
expected in January. The data suggested that the economy was
regaining some strength after a recent slowdown.
About 6.95 billion shares changed hands on U.S. exchanges, slightly
lower than the 7 billion average for the past month, according to
data from BATS Global Markets.
Decliners beat advancers on the New York Stock Exchange by a ratio
of about 2 to 1, while on the Nasdaq, about eight stocks fell for
every five that rose.
(Editing by Nick Zieminski and Jan
Paschal)
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