4 Days of Market Gains abruptly interrupted

August 15, 2014 12:20 PM


Briefly oblivious to geo-political risks inherent in Ukraine, U.S. and global markets were looking to add a fifth consecutive day of gains - building off the reversal higher we registered a week ago on Friday. That is until news of a border incursion by Russian troops and engagement by Ukraine forces hit the tape. Markets were up ended on impact and have fallen precipitously. The DOW went from +61 points to - 84 points in less than five minutes and is now lower by 102 points. The S&P 500 (below) NASDAQ and DOW all saw a surge in volume accompanying the risk off trade that gripped markets.     


As this chapter in this crisis continues to unfold any sense that markets will revert their focus to themes other than risk is folly. What I find a bit odd about this though is the muted response by European markets. I dare say there has been very little in the way of reaction other than by the DAX.     

Euro Stoxx - 0.28%

CAC 40 Index - 0.24%

DAX Index Futures Sept. 14 - 1.69%

FTSE 100 index + 0.44%

There is clearly is more to be uncovered in this story and that even given the dire nature of the news on the ground, European markets have already priced in a fair amount of the risk associated with any further incremental escalations in the crisis. The question - is this more than incremental?

There is little to no chance markets will regain the tone and posture we saw in trading before this news hit the tape. Given that it is a Friday in August, that it is an expiration day, and we are still positive on the week, most on Wall street will be happy to call it a day but only after buying some more volatility protection. The VIX is sharply higher on the session regaining the 14. handle. 14.32 last sale.

Today’s Economic Data  (clearly not inflationary):

July PPI + 0.1%

July PPI (excluding food & energy): + 0.2% July vs + 0.2% June

Empire State Index: 14.69 August vs 25.60 July 

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