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Dow Sheds 154 Points as Geopolitical Concerns Dominate Headlines

Upbeat manufacturing data dismissed as traders look across the globe

by 3/3/2014 4:21:28 PM
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"After a rough start to the year, February was very strong and many indexes achieved new highs," remarked Schaeffer's Senior Equity Analyst Joe Bell, CMT. "Well, the unsettling situation in Ukraine and the evolving situation between Russia and the rest of the world has taken center stage and created a lot of uncertainty. The markets don't like uncertainty, and selling is usually the quickest solution for your average investor. That's exactly what we saw today, as many participants simply unloaded their positions." With sellers holding the reins, the Dow Jones Industrial Average (DJI) spent the day trekking lower, ultimately closing with a triple-digit loss.

Continue reading for more on today's market, including:

  • Our CEO and founder Bernie Schaeffer details why this volatility ETN level is crucial to watch this week.
  • Speaking of volatility, Schaeffer's contributor Adam Warner wonders if geopolitical tensions have been weighing on volatility traders.
  • While the broader market faltered amid the standoff in Ukraine, Potash Corp./Saskatchewan (USA) (NYSE:POT) gained ground amid the escalating tension, as did other non-Russian potash names.
  • Plus ... John Kerry makes travel plans, U.S. manufacturing data improves, and General Motors Company (NYSE:GM) is targeted by a spread trader.
Trading Topic of the Week -- Ways to Win with Aggressive Trades: Focus on short-term options. Combat the negative effects of time decay -- and decrease your overall risk -- by keeping your time horizon as narrow as possible.

The Dow Jones Industrial Average (DJI - 16,168.03) headed lower out of the gate and traded in negative territory for the entire session, hitting an intraday low of 16,071.25 and finally closing down 153.7 points, or 0.9%. It was the blue-chip index's worst single-day loss since Feb. 3. All 30 Dow components were lower on the day, but the best performer on a relative scale was The Home Depot, Inc. (NYSE:HD), which only dropped a fraction of a point. Visa Inc (NYSE:V) was at the back of the pack, down 2% today.

The S&P 500 Index (SPX - 1,845.73) declined 13.7 points, or 0.7%, to move south of the psychologically important 1,850 level. The Nasdaq Composite (COMP - 4,277.30) logged a drop of 30.8 points, or 0.7%.

The CBOE Volatility Index (VIX - 16.00) surged 2 points, or 14.3%, today, amid rising uncertainty and heightened selling pressure across equity indexes. The VIX hadn't closed north of 16 since Feb. 6.



A Trader's Take:

"Gold and bonds are starting to see considerable interest, as investors rushed to potential safe havens," noted Bell. "One other bright spot for today's market was the outperformance of the materials sector, which was mainly due to the strong day from gold miners."

5 Items on Our Radar Today:

  1. Tensions continued to flare between Russia and Ukraine, as the former's threat of military force prompted talks of Western sanctions. U.S. Secretary of State John Kerry is preparing to visit Kiev, after concluding that Russian President Vladimir Putin's decision to assign troops to the Crimean peninsula was an "incredible act of aggression." (CBS News)
  2. At home, the Commerce Department noted that consumer spending rose 0.4% in January, topping economists' expectations. The services sector saw a 0.9% increase -- the sharpest gain since October 2001 -- as historically frosty temperatures increased demand for utilities. Personal income edged up 0.3% in January after being flat the previous month. (FOX Business)
  3. The Institute for Supply Management said its manufacturing index rose to 53.2, from an eight-month low of 51.3 in January. The reading -- which points to expansion in the sector -- topped economists' expectations. Markit's final purchasing managers index for February reached 57.1, above the flash reading of 56.7 and far north of January's final number. (Reuters; MarketWatch)
  4. A neutral-to-bearish trader sold a short-term call spread on General Motors Company (NYSE:GM).
  5. Oracle Corporation (NYSE:ORCL) enjoyed a price-target hike this morning, but still closed lower on the day.

For a look at today's options movers and commodities activity, head to page 2.

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