Stocks were back on course for the stratosphere on Tuesday after Vladimir Putin decided to withdraw his troops from the Ukraine.
Vladimir Putin’s decision to withdraw his troops from the Ukraine received an enthusiastic response from investors, as stocks soared on global
markets. America’s threats to seek economic sanctions against Russia carried extra weight, as the latest economic reports on Russia were quite dismal.
The invasion of the Ukraine did nothing for Russia’s ailing economy on Monday. The exchange rate for the ruble sank to approximately 51 per euro and February’s HSBC Russia Manufacturing PMI remained in contraction for the fourth consecutive month, with a reading of 48.5 – its second-lowest since July of 2009. January’s reading of 48.0 was the lowest since that point. Russia’s PMI has been in the contractionary range (below 50) for seven of the eight past months. The Russian Central Bank was forced to raise interest rates by 1.5 percent to 7 percent. A concerted effort to impose economic sanctions on the nation would make Russia’s bad situation much worse.
The Dow Jones Industrial Average (DIA) picked up 227 points to finish Tuesday’s trading session at 16,395 for a 1.41 percent advance. The S&P 500 (SPY) jumped 1.53 percent to a record-high close at 1,873.91 – after hitting a record intraday high of 1,876.23.
The Nasdaq 100 (QQQ) soared 1.41 percent to finish at 3,719. The Russell 2000 (IWM) skyrocketed 2.75 percent to a record-high close at 1,208.65 – after hitting a record intraday high of 1,212.82.
In other major markets, oil (USO) fell 1.23 percent to close at $37.06.
On London’s ICE Futures Europe Exchange, April futures for Brent crude oil declined $2.10 (1.90 percent) to $108.67/bbl. (BNO).
April gold futures fell $15.30 (1.13 percent) to $1,335.00 per ounce (GLD).
The transportation sector accelerated to warp speed during Tuesday’s trading session, as the Dow Jones Transportation Average jumped 2.23 percent to 7,466, climbing back above its 50-day moving average of 7,309 (IYT).
In Japan, the exchange rate for the yen continued to be the dominant factor in stock market activity. Japanese stocks advanced as the yen weakened to 101.91 per dollar during the last hour of Tuesday’s trading session in Tokyo. A weaker yen causes Japanese exports to be more competitively priced in foreign markets (FXY). Shares for Panasonic jumped 2.27 percent on the Tokyo Stock Exchange. The Nikkei 225 Stock Average climbed 0.47 percent to 14,721 (EWJ).
In mainland China, stocks retreated after the People’s Bank of China drained excess cash from the money market. The seven-day repo rate climbed to 3.5 percent. Investors remained anxious ahead of Wednesday’s kickoff of the annual National People’s Congress, wherein the legislature will set the 2014 economic growth target. The Shanghai Composite Index declined 0.18 percent to 2,071 (FXI). Hong Kong’s Hang Seng Index surged 0.70 percent to 22,657 as investors demonstrated relief following the news that the Ukraine crisis had cooled (EWH).
In Europe, the stock markets had a “relief rally” after Vladimir Putin ordered a troop withdrawal from the Ukraine. The Euro STOXX 50 Index finished Tuesday’s session with a 2.70 percent jump to 3,136 – rising back above its 50-day moving average of 3,089. Its Relative Strength Index is 55.65 (FEZ).
Technical indicators revealed that the S&P 500 climbed further above its 50-day moving average of 1,823 after Tuesday’s trading session brought a 1.53 percent jump to a record-high close at 1,873.91. Its Relative Strength Index (RSI) soared from 57.60 to 65.36. The MACD and the signal line are both climbing above the zero line, suggesting that the S&P could continue its advance during the immediate future.
On Tuesday, all sectors finished the session solidly in positive territory. The utilities sector was the laggard, with a 0.72 percent advance.
Consumer Discretionary (XLY): +1.25%
Technology: (XLK): +1.31%
Industrials (XLI): +1.45%
Materials: (XLB): +1.58%
Energy (XLE): +1.09%
Financials: (XLF): +2.04%
Utilities (XLU): +0.72%
Health Care: (XLV): +1.90%
Consumer Staples (XLP): +1.35%
Bottom line: Vladimir Putin’s ill-advised decision to invade Crimea was met with threats to send Russia’s ailing economy into a death spiral. As a result, Putin chose to abandon his plan, sending global stock indices higher.
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