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Weekly market recap: Ukraine causes retreat

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Overview

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For the week ending April 26, 2014, the markets finished down as tensions in Ukraine escalated on Thursday and Friday and the G7 members agreed to impose new sanctions on Russia. The economic news was mixed for housing and positive for manufacturing. Earnings season continues with mixed results from major companies.

With the Ukrainian presidential elections scheduled for May 25, activity by pro-Russian militants increased with the occupation of buildings in more than ten cities, and the hostage taking of international observers. In response, the U.S. has committed an additional 600 troops to Poland under NATO, and the G7 members have agreed to swiftly impose additional sanctions against Russia (details of the sanctions will be announced next week).

On the economic front, housing prices are increasing (and adding to consumer confidence) as both the FHFA House Price Index and Existing Home Sales reports show price strength. However, the housing sector remains weak as the New Home Sales report shows declines in sales across the South, Midwest, and West; only the Northeast shows a gain.

The manufacturing sector is getting a spring boost, as the Richmond Fed Manufacturing Index, PMI Manufacturing Index Flash, and the Durable Goods Orders reports all indicate this sector is regaining momentum.

On the earnings front, hundreds of companies reported this past week with mixed results. Netflix and Apple beat estimates; Amazon missed.

In The News

President Obama, on Friday, tells leaders of the four largest European economies (Germany, France, England, and Italy) that the U.S. plans to impose further sanctions against Russia. The Whitehouse released a summary of the conversations in which the "leaders agreed to work closely together, and through the Group of 7 and European Union, to coordinate additional steps to impose costs on Russia". It was also agreed that Russia has continued to escalate the situation in the Ukraine through rhetoric and military exercises on Ukraine's border.

The Justice Department may seek $13 billion from Bank of America due to the lender's sale of mortgage backed securities (known as "toxic assets") that contributed to the 2008 financial crisis. This comes on top of the recent $9.5 billion settlement to resolve Federal Housing Finance Agency claims.

Next Week

The economy continues to slowly improve, helped especially by the manufacturing and consumer sectors.

The focus next week in the U.S. will be the FOMC Meeting Announcement Wednesday afternoon, and the Employment Situation (Jobs Report, Unemployment Rate) Friday morning. The big questions are: will the improved weather show an April rebound; and will the Fed continue with its $10 billion taper.

Globally, China's CFLP Manufacturing PMI will be reported on Wednesday evening. The EMU will be reporting: EC Economic Sentiment on Tuesday morning; and the HICP Flash on Wednesday morning.

We are expecting volatility spikes to continue next week as the situation in the Ukraine unfolds, and the FOMC announces its policy position. As we enter into May and the Ukrainian presidential elections near, we are expecting the Ukraine crisis to worsen, possibly initiating a big adjustment in the markets.

Market Gauge

Year-to-date the markets are mixed: Dow -1.3%; S&P500 +0.8%; Nasdaq -2.4%.

The Markets for the past week were: DJIA down -0.3%; S&P500 down -0.1%; Nasdaq COMP down -0.5%.

Commodities (ETFs) for the past week were: Gold (GLD) up 0.55%; Silver (SLV) up 0.32%; Oil (OIH) up 2.31%; Dollar (UUP) down -0.14%; 30-yr Bonds (TYX) dropped 7 basis points to 3.45%.

The VIX this past week (a measure of market sentiment and volatility) rose to 14.06% due to increasing concerns over the Ukraine crisis.

Top Headlines

To view details of headlines, go online to CNBC.

In the U.S.: US consumer sentiment at 9 month peak; Service sector shows signs of a slowdown; Why housing is stalling the economy; What older Army recruits say about jobs; Mixed bag: US durables surge—but so do claims; US factory activity up in April, but pace stalled; No deal! New home sales swoon in recovery setback; Behind Janet Yellen's inflation dilemma; America's middle class no longer world's richest; Detroit bankruptcy judge turns to advisors for help; How income inequality can hurt the economy; Forget income equality—this is Hollywood!; Leading indicators rise 0.8%, inch above estimates; Many Americans being forced to lead the 'temp' life; Economists expect US to shake off winter slowdown; Monetary policy can't save unemployed: Economist; Philly Fed factory activity accelerates in April; US claims tick higher, suggesting labor rebound; Yellen: Rates to remain low for 'considerable time'; US manufacturing extends spring thaw in March; Obama, Biden to announce $600M for job grants; Get Fed speak in line with projections: Lockhart; March US housing starts climb, fall short of hopes; and Falling rates boost mortgages applications.

In Europe: G7 to impose new sanctions on Russia; London tower may sell for $1.7 billion; US, allies to impose new Russian sanctions; Nokia seals Microsoft deal; Greece warned of 14.9 billion euro financing gap; Microsoft tackles Apple, Samsung with Nokia deal; GE in talks to buy Alstom global power arm: Sources; UK and US rival emerging markets in manufacturing; Online gambling: The new home for money launderers?; Russia 'wants to start World War III': Ukrainian PM; Obama to call EU leaders in Russia sanctions push; European elections: Why you should care; Alstom CEO says in talks over industrial deal; Volvo ups North America outlook after profit rise; S&P downgrades Russia, central bank hikes rates; Ukraine crisis escalates: What this means for investors; John Kerry warns Russia of further sanctions; Arrests and disappearances on rise in east Ukraine; EU corruption risk rises as ‘blind spots’ exposed; Ukraine forces kill rebels; Russia starts military drills; Independent Scotland risks Iceland-style crisis: S&P; Europe's blue-chips warn on euro strength; Barclays bosses confident of shareholder support; and German business sentiment up, eastern headwinds loom.

In Asia: Obama reminds North Korea of US 'military might'; Japan, US tiptoe into new phase of trade talks; The Chinese take Manhattan; Is Japan winning the war against deflation?; Footwear maker for Nike counts cost of China strike; Alibaba founders set up $3 billion charitable trust; China web porn crackdown hits Sina shares; Days of one-way yuan bet may be over for good; Luxury hotelier: Oversupply is a big issue for China; Here's how big China's current account surplus is; Here's who could be next to join the rate-hike camp; China's Baidu forecasts stronger-than-expected revenue; Forget Chanos. Cat CEO fights back on China; Obama reassures ally Japan; no breakthrough on trade; Why India's stock market may keep outperforming China; 'Mistress' of China Resources chairman probed; Australia says beach debris not from MH370; South Korean economy holds firm in first-quarter; Why Japan's economy is in better shape than China's; Japan inflation likely already beaten forecast: Kuroda; India, Iran in deal to ease sting of sanctions; New Zealand central bank hikes rates again; Word's biggest pork firm slashes IPO, delays pricing; and Obama reassures Japan on China as Asia trip begins.

Weekly Review

To see the week in review, go to the Econoday calendar.

On Monday, with little news, the Dow rose 0.3% to 16,449.

On Tuesday, with strong housing prices (but flat housing sales) and strong manufacturing sector, the Dow rose 0.4% to 16,514.

On Wednesday, with poor New Home Sales (sharp decline), the Dow dropped fractionally to 16,501.

On Thursday, with mixed economic news but a good Durable Goods Orders report, the Dow remained unchanged at 16,501.

On Friday, with the escalating Ukraine crisis causing concern in the markets, the Dow dropped -0.9% 16,361. Gold rose $10 to $1,300.

Next Week's Calendar

To see what's on the calendar for next week, go to the Econoday calendar.

The economic calendar for next week is full: on Monday – Pending Home Sales Index, Dallas Fed Mfg Survey; on Tuesday – S&P Case-Shiller HPI, Consumer Confidence; on Wednesday – Weekly EIA Petroleum Status Report, ADP Employment Report, GDP, Employment Cost Index, FOMC Meeting Announcement; on Thursday – Weekly Jobless Claims, Motor Vehicle Sales, Personal Income and Outlays, FedSpeak (Janet Yellen), PMI Manufacturing Index, ISM Mfg Index, Construction Spending; and Friday – Employment Situation, Factory Orders.

If the Markets move down, stay on the side lines or consider Contra ETFs. For Option players, selling premium is advised.

For more information about options, see the 'Suggested by the author' links below.

To the Charts

The following ETFs (DIA, SPY, QQQ) provide a technical review of the Market (and are also excellent Option trading vehicles). Represented are the Dow Industrials (DIA), S&P500 (SPY), and Nasdaq 100 (QQQ).

The Charts for each include views for Monthly, Weekly (including Price Channels), and Daily (including monthly Pivot Points) with MACD and Stochastic indicators. The Pivots are: white for central pivot point; yellow for R1 and S1; magenta for R2 and S2; red for R3 and S3.

DIA

The Dow Industrials (DIA) closed down at 163.35. If the DIA drops, then the next level of support will be at 159.88 (weekly chart); the next level of major resistance is 166.06 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving up above the overbought area.

The weekly chart indicates a bearish posture (down Arrow) with the MACD positive and strengthening, and the Stochastic moving down below the overbought area.

The daily chart indicates a bearish posture (down Arrow) with the MACD positive but weakening, and the Stochastic moving up below the overbought area.

SPY

The S&P500 (SPY) closed down at 186.29. If the SPY drops, then the next level of support will be at 181.31 (weekly chart); the next level of major resistance is 189.70 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving up above the overbought area.

The weekly chart indicates a bearish posture (down Arrow) with the MACD positive and strengthening, and the Stochastic moving down below the overbought area.

The daily chart indicates a bearish posture (down Arrow) with the MACD positive but weakening, and the Stochastic moving up toward the overbought area.

QQQ

The Nasdaq 100 (QQQ) closed down at 86.19. If the QQQ drops, then the next level of support will be at 83.28 (weekly chart); the next level of major resistance is 91.36 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving down above the overbought area.

The weekly chart indicates a bearish posture (down Arrow) with the MACD negative but strengthening, and the Stochastic moving down above the oversold area.

The daily chart indicates a bearish posture (down Arrow) with the MACD just negative, and the Stochastic moving up above the midpoint.

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