Tuesday, July 29, 2014 -
Stocks rallied out of the gate this morning only to drop on news of EU sanctions against Russia and then fall some more when President Obama followed with further US sanctions on Russia.
In early trading it looked like support levels were going to hold prices up heading into tomorrow’s FOMC report. Then it was learned that the Eurozone finally announced sanctions on Russia after being pressured by the US and other global leaders following the shooting down of a passenger plane, presumably by pro-Russian forces in Ukraine.
Stocks rallied back into positive territory by mid-day only to succumb to onslaught selling when President Obama took the mic and announced further US sanctions on Russia. From that time forward prices steadily retreated into the close, closing at the lows of the day.
The major indexes closed in negative territory, with the Nasdaq edging down only 2 points (-0.1%) to 4,443. The Dow fell 70 points (-0.4%) to 16,912 and the S&P 500 slid 9 points (-0.5%) to 1,970. The NYSE finished at -0.5% and the small cap Russell 2000 managed to keep its head just above water at +0.2%.
The initial round of selling early in the day occurred just after the European Union governments announced some moderate economic sanctions against Russia due to its role in the ongoing crisis in Ukraine. Greater selling took off later in the day after President Barack Obama announced that the U.S. is also imposing a new round of sanctions on Russia.
The Israel/Gaza conflict was moved off the front page headlines on news of these joint efforts to make meaningful sanctions on Russia in an effort to get them to pack up and leave Ukraine.
Goldilocks Sanctions on Russia
I like how a writer at ZeroHedge addressed the tougher sanctions imposed by the Eurozone today, which in turn led to additional US sanction from President Obama . . . “just enough to please Washington, not enough to infuriate Putin.”
Similar to the weak sanctions already imposed by the US, the EU sanctions reportedly include limiting state-owned Russian banks’ access to European capital markets and restricting exports of oil-production equipment to Russia.
Despite the strong market reaction to further sanctions on Russia, the US media was quick to announce to the world that the US has approved export on dual-use goods to Russia and also emphasize that the US hasn’t revoked Russian export licenses and that US/Russian goods affecting military applications are not part of any sanctions – hence the “Goldilocks” moniker.
Later today the EU media also revealed a soft side of the sanctions, reporting that the sanctions (1) would apply to a limited number of Russian banks, (2) would not include . . . . . .
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