U.S. Stocks Decline After Two-Day Rally Amid Ukraine Tensions

8/12/2014

U.S. stocks declined, after the Standard & Poor’s 500 Index produced its biggest two-day gain since April, as investors watched geopolitical developments and energy shares sank after Brent crude reached a nine-month low.

The S&P 500 fell 0.2 percent to 1,933.80 at 4 p.m. in New York. The Dow Jones Industrial Average slipped 8.25 points, or 0.1 percent, to 16,551.73.

“We’re in a zone of ambivalence with investors maintaining a cautious bias,” Terry Sandven, chief equity strategist at Minneapolis-based U.S. Bank Wealth Management, which oversees $124 billion, said by phone. “Equities appear to be navigating the dog days of summer with markets being driven more by geopolitical events than economic and company fundamentals.”

The S&P 500 climbed 1.4 percent in the previous two trading days amid speculation that tension in Ukraine would lessen. The S&P 500 had fallen 3.9 percent from its record of 1,987.98 on July 24 on concern that conflicts from Iraq to Israel and Ukraine could slow global economic growth.

Data today from Germany reignited those concerns, after investor confidence reported by the ZEW Center dropped for an eighth month as the crisis in Ukraine and a sluggish euro-area recovery damped the outlook for Europe’s largest economy.

A Russian humanitarian mission was headed toward eastern Ukraine after the U.S. warned President Vladimir Putin not to use aid as a cover to send in troops. Ukraine said it won’t let the convoy enter in its current form because it argues the mission doesn’t adhere to international rules.

Middle East

Equities pared declines after Russia’s Foreign Minister Sergei Lavrov called on Germany to assist with the aid mission. Lavrov spoke by phone with German Foreign Minister Frank-Walter Steinmeier today, the Russian Foreign Ministry website said.

In the Middle East, wide gaps remain between Israel and the Palestinians in reaching a long-term deal on the Gaza Strip, an Israeli official said, as Hamas warned there would be no more truces beyond the one due to end at midnight tomorrow.

Iraq’s Prime Minister Nouri al-Maliki chaired a meeting of military officers in the latest sign that he won’t hand power to designated successor Haidar al-Abadi.

“We have some bad news on German investor confidence, and bad news from the euro zone in the long term impact the U.S.,” Walter Todd, who oversees more than $1 billion as chief investment officer for Greenwood, South Carolina-based Greenwood Capital Associates LLC, said in a phone interview. “The economic data from the U.S. is very good, but if the economic situation in Europe continues to deteriorate, we’re not going be immune from that forever.”

U.S. Data

Recent reports have shown U.S. gross domestic product expanded at a 4 percent annual pace in the second quarter, confirming the Fed’s view that a first-quarter contraction was transitory. Employers in the U.S. added more than 200,000 jobs for a sixth straight month in July, the longest such period since 1997.

A government report today showed job openings rose in June to the highest level in more than 13 years, firming up the U.S. labor market picture for the second half of the year. The figures are among those on Federal Reserve Chair Janet Yellen’s labor-market “dashboard,” which she uses to help guide monetary policy.