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What are the markets so happy about?

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Bob Keiser, S&P Capital IQ

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Bob Keiser, S&P Capital IQ

Bob Keiser, S&P Capital IQ
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Stocks are rallying in the wake of the latest developments in the Ukraine region. Shares rallied yesterday as Crimea moved closer to rejoining Russia. After five days of nervous anticipation that held stocks lower last week, stocks so far this week have gone straight up. Even with Russian troops massed along the eastern border of Ukraine, Wall Street interpreted comments made early Tuesday by Russian President Vladimir Putin as a sign he does not plan to escalate the situation further by advancing troops into mainland Ukraine. Stock futures turned positive during President Putin’s speech, stretching the rally into a second day. If the stock market’s apparent willingness to look beyond the situation in Ukraine surprises you, you’re not alone.

Bob Keiser, Vice President of Global Markets Intelligence at S&P Capital IQ, thinks the markets are giving the whole situation in Crimea a pass right now because investors are focused on matters closer to home, like the economy. “I personally have been a little surprised. This is a fairly major geopolitical disturbance and the market’s held in there very well,” said Keiser. “The market’s really looking forward to better information coming into the marketplace in the second quarter of this year and it’s those expectations that are probably helping keep the market together and allowing the market to look past what is a fairly significant risk to the marketplace if Russia decides to start to move into the Ukraine instead of keeping things isolated in Crimea.”

For now, investors appear content to take President Putin at his word that he is not seeking “a partition” of Ukraine. But Keiser warns any sign to the contrary would change traders’ outlook in short order. “This could escalate pretty quickly and I think the market would get much more defensive if Putin were to start looking toward the Ukraine,” said Keiser.

Stocks cheered the apparent lack of escalation in Ukraine, while a new round of U.S. economic data came in largely in-line with Wall Street expectations and seemed to support the idea that the economy will continue to improve slowly as the effects of the harsh winter weather begin to dissipate into the early spring months. Consumer prices ticked up 0.1% in February, as expected. Housing starts came in just slightly below economists’ expectations of 910,000 at 907,000. Keiser said these numbers are in line with the recent trend on the economy: the data has been a little soft, but not as bad as the market feared it could be due to the severe weather across the United States. “There’s a lot of anticipation when you get these types of numbers that things will start getting better pretty quickly when we move into March and April data,” said Keiser.

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