Published On: Tue, Jul 22nd, 2014

Gaza, Russian Conflict, Impacting US Stocks, But Not by Much

Investors may be nervous about the market, but are not panicking yet.



Geopolitical tensions between the Gaza and Israel and Russia and the Ukraine may have been responsible for a modest decline in the averages on Monday after stocks finished up sharply on Friday. The Dow closed down 48 points, the S&P 500 finished 0.2% lower and the Nasdaq dropped 0.2%. The fact that stock sectors were affected evenly indicates the sell-off wasn’t caused by bad news in a particular industry, and apart from earnings reports, there was little economic news on Monday.

Over the past weekend, the ground war between Israel and Gaza escalated with mounting casualties, and sanctions against Russia were discussed in Europe over the weekend in the aftermath of the downing of a Malaysian Airlines plane.

CNBC’s Jim Cramer cited strong earnings data and other domestic economic factors for the lack of a more dramatic sell-off, and also didn’t think the market perceives either global conflict as having an intense impact on individual stocks. While many U.S. companies do business with Russia, sales in the region for most companies aren’t significant enough to cause distress. Sanctions against Russia might be a larger problem  for the European economy than for U.S. companies, but ultimately, a slow European economy may lead to slower sales on the Continent.

The spiking of the VIX Volatility or “Fear Index” before it dropped at the end of Monday and a relatively low trading volume at 530 million shares may show that investors are nervous about the market, given the current global problems, but are not panicking yet. However, there is room for caution that an escalation of either or both conflicts could impact the economy and the stock market.


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