Fears about Gaza, Ukraine turmoil nudge stock market downward

Posted July 21, 2014, at 4:58 p.m.

NEW YORK — U.S. stocks slipped on Monday as investors remained cautious about instability in Ukraine and Gaza, though the three major indexes ended well off their lows, a sign that some appetite for riskier assets remained.

The S&P 500 fell as much as 0.6 percent, though it recovered most of those losses and closed right above its 14-day moving average, suggesting buyers were using weakness to come back into the market. Still, the day’s losses were broad, and nine of the 10 primary S&P 500 sector indexes fell. The S&P energy sector index represented the only positive group, up 0.2 percent. U.S. crude oil for August delivery shot up 1.4 percent to settle at $104.59 ahead of Tuesday’s contract expiry.

Violence escalated in the Gaza Strip despite growing international calls for a cease-fire. The Palestinian death toll rose above 500 while Israel’s losses also mounted. While the impact to the U.S. economy is seen as minimal, investors are concerned about the fallout from an extended period of increased violence as well as the prospect that it could spread to other parts of the Middle East.

Market participants also kept watch on the uncertain situation in Ukraine, where fighting flared in the city of Donetsk. The United States and the European Union announced further economic sanctions against Russian interests last week before the Malaysian Airlines jet was shot down, and sanctions could become even more stringent.

The Dow Jones industrial average fell 48.45 points or 0.28 percent, to end at 17,051.73. The S&P 500 declined 4.59 points or 0.23 percent, to finish at 1,973.63. The Nasdaq Composite dropped 7.44 points or 0.17 percent, to close at 4,424.70.

The CBOE Volatility Index climbed 6.2 percent to 12.81, a level that is well below its historical average of 20. Some analysts have suggested that the low volatility has left the market — which hasn’t had a correction, defined as a 10 percent pullback, since October 2011 — vulnerable to a shock.

After the market closed, Netflix Inc. reported a quarterly profit that more than doubled from a year ago. Netflix shares rose 1.7 percent to $459.65 after the bell.

Chipotle Mexican Grill Inc. shares jumped 8.1 percent to $637.50 after the market closed following the burrito chain’s results, which included second-quarter revenue that sharply exceeded Wall Street’s expectations.

Herbalife dropped 11 percent to $54.02 after Pershing Square’s Bill Ackman told CNBC he would present evidence on Tuesday that the company is an “incredible fraud.”

McDonald’s Corp. shares slid 1.5 percent to $97.55 and Yum Brands Inc. shares fell 4.2 percent to $74.13 as the fast-food restaurant chains face a new food safety scare in China, denting efforts to shore up reputations hurt by a 2012 safety scandal in one of their biggest markets.

About 61 percent of stocks traded on the New York Stock Exchange ended the day lower, while 59 percent of Nasdaq-listed shares finished the regular session in negative territory.

About 4.91 billion shares traded on all U.S. platforms, according to BATS exchange data, below the month-to-date average of 5.6 billion.

 

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