U.S. stocks fall amid global equities selloff on Ukraine turmoil

RUSSIA'S MILITARY TAKEOVER of the Crimean Peninsula and questions about whether it will invade eastern Ukraine roiled global stock markets Monday, including at the New York Stock Exchange in New York. / BLOOMBERG NEWS PHOTO/JIN LEE
RUSSIA'S MILITARY TAKEOVER of the Crimean Peninsula and questions about whether it will invade eastern Ukraine roiled global stock markets Monday, including at the New York Stock Exchange in New York. / BLOOMBERG NEWS PHOTO/JIN LEE

NEW YORK – U.S. stocks sank, tracking a global selloff in equities, as Russia’s threat to invade Ukraine sent investors searching for havens.

General Electric Co. and Caterpillar Inc. each plunged 1.2 percent to pace declines among large industrial shares. The Market Vectors Russia ETF tracking companies from Gazprom OAO to OAO Lukoil dropped 6.4 percent. Yandex NV, a U.S.-listed online search engine operating in Russia, slumped 10 percent. Newmont Mining Corp., the largest U.S. producer of gold, jumped 2.8 percent.

The Standard & Poor’s 500 Index fell 0.6 percent to 1,848.76 at 9:49 a.m. in New York. The gauge closed at a record on Feb. 28. The Dow Jones Industrial Average dropped 131.04 points, or 0.8 percent, to 16,190.67. Trading in S&P 500 stocks was 11 percent above the 30-day average at this time of day.

“We never know what will happen with Russia and this always makes people nervous,” said Michael Morris, head of equities at Mitsubishi UFJ Asset Management in London. “You have a president that is trying to expand Russia’s global political powers but the country may not have the capacity for this fight. It’s too soon to know what the outcome might be but I’m not at all surprised to see the markets down today.”

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The tensions sent stocks tumbling around the world, with the MSCI All-Country World Index sliding 0.8 percent. Russian stocks had their biggest decline in five years and the Europe Stoxx 600 plunged 2 percent, its biggest slide in five weeks. Emerging-market stocks dropped 1.5 percent. Gold soared 2 percent and Treasuries rallied.

Ukraine tension

Ukraine mobilized its army and called for foreign observers after Russian President Vladimir Putin got approval to use military force in Ukraine. Groups of as many as 100 Russian soldiers attacked Ukrainian army units in Crimea, where ethnic Russians comprise the majority, the border guard service said.

U.S. Secretary of State John Kerry is traveling to Kiev Monday after warning of possible sanctions against Russia. European Union foreign ministers will hold an emergency meeting today, while the Group of Seven nations suspended planning for the Group of Eight summit in Russia in June.

“The Ukraine news is troubling, but there are always global risks and short-term fluctuations because of these risks,” Karyn Cavanaugh, a market strategist at ING U.S.Investment Management in New York, said in a phone interview. Her firm oversees about $200 billion. “I see this being short-term unless it escalates. If we do see some market gyrations and volatility, it could be a buying opportunity.”

February rally

The geopolitical tension comes after the S&P 500 rose 4.3 percent in February, the most since October, to end the month at a record 1,859.45. Investors have been speculating that recent weakness in data from housing to jobs was caused by inclement weather and that the Federal Reserve will continue to support the economy.

U.S. equities are set to enter the sixth year of a bull market that started March 9, 2009. Three rounds of stimulus have helped push the S&P 500 up 175 percent from a 12-year low.

The S&P 500 plunged 5.8 percent from Jan. 15 to Feb. 3 on concern that growth was slowing in China and emerging-market currencies got routed as the Fed began to reduce stimulus. Data today showed two gauges of Chinese manufacturing in February signaled slower growth.

Data at 10 a.m. in Washington, D.C., may show that U.S. manufacturing expanded at a faster pace in February, economists in a Bloomberg News survey projected. The Institute for Supply Management’s factory index probably rose to 52 last month from January’s 51.3, according to the median estimate.

U.S. data

A separate report indicated consumer spending rose 0.4 percent in January after a 0.1 percent gain the prior month. The median forecast of 76 economists in a Bloomberg survey called for a 0.1 percent rise. Incomes advanced 0.3 percent.

The Chicago Board Options Exchange Volatility Index, a gauge for U.S. stock volatility, jumped 15 percent to 16.10 today. Options tied to gains in the VIX reached the highest prices in six years last week, reflecting bets that the calm prevailing in equities for the last year won’t last.

A series of calls that appreciate in tandem with the VIX climbed to the highest level since May 2007 relative to puts, according to data compiled by Bloomberg.

“It should be an enormous advantage for investors in stocks to have those wildly fluctuating valuations placed on their holdings,” Warren Buffett, chairman and CEO of Berkshire Hathaway Inc., said in his annual letter to investors last week.

Industrial shares

Nine of 10 main groups in the S&P 500 retreated today. Industrial shares slid 0.8 percent as a group. General Electric lost 1.4 percent to $25.11 and Caterpillar dropped 1.2 percent to $95.83.

Banks and other financial firms tumbled 0.9 percent. American Express Co. sank 1.3 percent to $90.06 to pace declines. Goldman Sachs Group Inc. declined 1 percent to $164.73.

Yandex, whose market share in Russia is twice that of Google Inc.’s, dropped 10 percent to $33.74. The shares have lost 13 percent this year, compared with a gain of 1.6 percent for a gauge of technology stocks listed on the S&P 500. The Russian ETF dropped 10 percent to $22.

Newmont Mining rallied 2.8 percent to $23.90 after gold rallied to a four-month high in New York as investors bought the metal as a haven.

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