Stocks Tumble as Worries About Russia and Ukraine Build

Markets React At Opening To Monthly Job Numbers
Spencer Platt/Getty Images
BY KEN SWEET

NEW YORK -- Renewed concerns that tensions could flare up between Russian and Ukraine pushed U.S. stocks sharply lower Tuesday.

The market had been moderately lower all day, weighed down by a disappointing earnings forecast from retail giant Target (TGT) and a report on China that showed the world's second-largest economy was slowing down.

The selling accelerated in afternoon trading. The Dow Jones industrial average (^DJI) fell nearly 200 points at one point, but recovered some of those losses in the last 30 minutes of trading.

Several traders pointed to news reports of a buildup in Russian troops on the Ukraine border and comments from a Polish politician that reportedly said Russia was poised to invade or pressure Ukraine's eastern border as catalysts for the selling.

The developments came after the most recent round of sanctions were imposed on Russia by the U.S. and Europe last week. Russia called Tuesday for a meeting of the U.N. Security Council to discuss the situation in Ukraine.

The Ukraine-Russia tensions were "outweighing any good economic data" that investors had to work with Tuesday, said Tom di Galoma, a bond trader at ED&F Mann Capital.

The Dow lost 139.81 points, or 0.8 percent, to 16,429.47, the lowest level for the index since mid-May. The Standard & Poor's 500 index (^GSPC) lost 18.78 points, or 1 percent, to 1,920.21 and the Nasdaq composite (^IXIC) fell 31.05 points, or 0.7 percent, to 4,352.84.

The tensions between Russia and Ukraine have been a headache for investors for months now. However the stakes are higher than before, investors say.

With winter a few months away, Europe's recovering economy remains dependent on Russian natural gas for heat and electricity. Germany imports nearly all its natural gas from Russia, and France also gets a significant amount of its energy needs from Russia.

"Europe's economy is far more exposed to Russia than the U.S.," said Randy Frederick, a managing director at Charles Schwab.

Tuesday's losses add to what has been a tough couple of weeks for U.S. markets. The S&P 500 fell 2.7 percent last week, its worst five-day performance since June 2012. While the market did recover some Monday, Tuesday's losses wiped out those gains, leaving the Dow and S&P 500 lower for the week.

International events have been in the forefront of investors' minds for the last two weeks, and have been a major reason stocks have fallen. There was the near-failure of a Portuguese bank, Argentina defaulting on its bonds, the Israeli-Gaza conflict on top of the tensions between the U.S., Europe and Russia over Ukraine. Strategists say investors are in a wait-and-see mode.

"Once these geopolitical issues calm down, we should move higher from here," Frederick said.

One sign of investor nervousness can be seen in the VIX, a financial instrument that gauges how much stock market volatility investors expect in the future. The VIX jumped 10 percent to 16.71 on Tuesday. The index is trading at levels not seen since April and was as low as 11 just two weeks ago. The higher the index goes, the more turbulence investors expect to see in the future.

Investors did get two positive reports on the U.S. economy, but it was not enough to move the market higher.

The Institute for Supply Management said the U.S. services sector expanded in July more than expected. The ISM survey came in at 58.7 versus the 56.5 economists had predicted. June factory orders also rose more than expected, rising 1.1 percent compared to the 0.6 percent increase economists were looking for.

Among individual stocks, Target dropped $2.67, or 4.4 percent, to $58.03 after the company lowered its second-quarter earnings forecast. Target said the massive data breach the company experienced last year was costing far more than previously expected. Shoppers remain cautious about shopping at the store, Target said.

Twenty-First Century Fox (FOX) rose 7 percent in after-market trading after Rupert Murdoch's media company said it was pulling its bid to buy Time Warner. Shares of Time Warner (TWX) dropped 11 percent in after-market trading following the news.

The dollar rose to 102.56 yen and the euro dipped to $1.3377.

In energy markets, crude oil fell 91 cents to close at $97.38 a barrel on the New York Mercantile Exchange. Brent crude, a benchmark for international oils used by many U.S. refineries, fell 80 cents to close at $104.61 on the ICE Futures exchange in London.

Gold fell $3.70 to $1,284.00 an ounce and silver fell 40 cents to $19.83 an ounce. Copper fell four cents to $3.20 a pound.

The yield on the 10-year Treasury note was unchanged from the day before at 2.48 percent.

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32 Comments

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usapaydirt

With heavy handed sanctions on Russia, the opposite should be true. Russia's invasion of Crimea, also didn't have the sustained downward effect on the markets, as one would anticipate. It appears the markets at present, are being manipulated by the heavy players, with everyone else following their trends.....

August 06 2014 at 6:20 AM Report abuse rate up rate down Reply
williambeasy

Best be more worried what's going on behind our backs from our own politicians than from without. We're in dire straits.

August 05 2014 at 11:46 PM Report abuse +1 rate up rate down Reply
SPQR

I can see Warren Buffet calling his broker and saying "SELL" Pution is going to attack !!! Hmm what will he do with his money if they do attack? Nothing

August 05 2014 at 11:19 PM Report abuse -2 rate up rate down Reply
YourFtr

Or Putin may wait until October or November; when the winter will crack up the Eu sanctions, and after that.....he is free to invade the Ukraine...!!

August 05 2014 at 11:19 PM Report abuse rate up rate down Reply
YourFtr

Putin might figure that as Obama has fired all the good generals and admirals and has fired, like 1,500 Captains, and is about to fire hundreds of Majors
that the US military is unable to come to the Ukraine's assistance.....
A fast blitzkrieg and Putin will be in Kiev....!!
Obama's only options is to go nuclear or order the US army intio the Ukraine.......

August 05 2014 at 11:16 PM Report abuse -1 rate up rate down Reply
1 reply to YourFtr's comment
welcome eric

Neither one of the outcomes you suggested in your last sentence are even remotely plausable.

August 05 2014 at 11:30 PM Report abuse +1 rate up rate down Reply
dellavar

This is such a typical stock market bullshit setup. Nobody likes war like the stock market does. The military -industrial complex salivates over the very idea of war. So much so they have managed to keep in almost permanent military activity since WWII (the last war we actually won.) GE and GM and General Dynamics et al are not only huge corporations, folks - along with Ford, Hughes, Boeing, and the rest of the top 400 corporations they are the largest military contractors. Their stock will steadily rise as the winds of war begin to wail once again. Their CEO's will bank billions into Swiss accounts (funny how Switzerland NEVER gets bombed or invaded) thousands of Americas less-educated citizens will take up uniforms and die for the cause dujour and the beat goes on. "Stocks tumble due to worries..." Give me a break......

August 05 2014 at 10:32 PM Report abuse +1 rate up rate down Reply
1 reply to dellavar's comment
gfy.gfy

Switzerland also issues all men a firearm and has them join the militia.

August 05 2014 at 11:27 PM Report abuse -2 rate up rate down Reply
rbi2787

Our family stopped shopping at Target after they decide we should be victims and not be able to defend ourselves or our children in their stores. No thank you to their decision. We take our money elsewhere

August 05 2014 at 10:01 PM Report abuse -1 rate up rate down Reply
1 reply to rbi2787's comment
SPQR

Target always sucked

August 05 2014 at 11:20 PM Report abuse -1 rate up rate down Reply
fakeconomics01

Who cares about Russia and Ukraine? may be Europeans who are dependent on Russian Oil. We don't deserve all these kakamania stories.

August 05 2014 at 9:18 PM Report abuse rate up rate down Reply
2 replies to fakeconomics01's comment
Iselin007

That is a problem. Many of the Europeans depend on Russia. Curse the Globle New World Order! Were all just another trade deal away from Oblivion.

August 05 2014 at 9:31 PM Report abuse rate up rate down Reply
SPQR

Obama will sell them our oil ...no problem

August 05 2014 at 11:20 PM Report abuse -1 rate up rate down Reply
Iselin007

At the end of December 1779, Major General Henry Clinton succumbed to this view and headed south with a small army. His goal was to capture Charleston, South Carolina - now that Savannah had been successfully taken by the British. Clinton approached steadily, arriving opposite Charleston on April 1. He then began a classic European siege. The British dug siege trenches ever closer to the wall of the city. Day by day, week by week, the British got ever closer to the wall of the city

Gee I wonder If the 2 Clintons were related?

August 05 2014 at 8:50 PM Report abuse -4 rate up rate down Reply
Iselin007

WICKHAM, THOMAS
CT
Commander, Connecticut Privateers

Thomas Wickham was a resident of New London County, Connecticut. He was commissioned to the Connecticut Privateer Sloop Hampton Packet on 23 October 1781, being one of the co-owners of the privateer. Wickham captured the unknown two-masted boat (or schooner) on 23 December 1781 and the schooner Peggy on 2 March 1783. [Middlebrook, Maritime Connecticut During The Revolution, II, 105-106; NRAR, 323]
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Some of our familes created the United States others just ship our jobs overseas by signing trade deals.

August 05 2014 at 8:40 PM Report abuse -4 rate up rate down Reply