Whether it’s good news or bad news, it is often surprising how investors and markets react. Last week, Russia annexed Crimea and the Standard & Poor’s 500 Index gained about 1.4 percent.
This week, U.S. investors had the chance to bask in the glow of some good news: jobs growth was healthy, consumer spending improved modestly, consumer confidence numbers were better than expected, and fourth quarter’s U.S. gross domestic product (GDP) growth number was revised upward. How did U.S. markets respond? Only the Dow Jones Industrial Average finished the week in positive territory.
What offset the good domestic news?
First, there was some not-so-good domestic news. Several banks, including a leading global bank, failed the Federal Reserve’s stress test causing share prices in the banking sector to fall.
Next, there was some global news that proved to be unsettling for American investors. According to Barron’s, U.S. markets had a strong negative response to comments made by President Obama after a summit meeting with top European Union (EU) officials. Reuters quoted the President as saying, “If Russia continues on its current course, however, the isolation will deepen, sanctions will increase, and there will be more consequences for the Russian economy.”
The President also said NATO would increase its presence in Eastern European member states that share borders with Russia and Ukraine. The upcoming Group of Eight summit meeting was cancelled and a G-7 meeting – excluding Russia – was scheduled for June in Brussels.
Investors and stock markets in other countries were far more sanguine about world events, and most finished the week higher. As reported by Econoday, “Investors were cheered by talk of Chinese stimulus and encouraging U.S. economic data… Equities advanced thanks to renewed chatter about monetary stimulus from the European Central Bank.”