US stocks gain despite Iraq, Ukraine uncertainty

Wall Street contended with rising tensions over Ukraine and Iraq, yet US stocks still finished in the black for the week following a big rally Friday.

AFP| Updated: Aug 09, 2014, 10:21 AM IST

New York: Wall Street contended with rising tensions over Ukraine and Iraq, yet US stocks still finished in the black for the week following a big rally Friday.

The Dow Jones Industrial Average rose 60.56 points (0.37 percent) to 16,553.93 over the week.

The broad-based S&P 500 rose 6.44 (0.33 percent) to 1,931.59, while the tech-rich Nasdaq Composite Index added 18.26 (0.42 percent) at 4,370.90.

Analysts said investors were increasingly cautious over the uncertain Ukraine situation after Russia barred imports of most food items from the US and the European Union in retaliation for Western sanctions, and stepped up its troop presence on Ukraine`s eastern border.

Violence in Iraq also returned to the forefront after the US ordered air strikes and food and water drops to respond to dramatic victories by Islamic jihadists in Northern Iraq.

"These hotspots have become hotter," said Alan Skrainka, chief investment officer at Cornerstone Wealth Management.

"It seems as though geopolitical news has finally started to grab investors` attention."Still, US stocks Friday enjoyed a solid rally that made up for the losses earlier in the week.

Some analysts said the market had been oversold, and that the bounce-back fit into a pattern throughout the bull run of the last two years whenever problems have surfaced in Syria or Israel or Ukraine.

These international conflicts have typically pushed US stocks lower at first, only to see a rebound once investors shifted their attention back to fundamentals in the absence of concrete examples of harm to the US economy.

Some analysts say US equities are well-situated compared with their European counterparts, given the differences in economic outlooks and the particulars of the current hotspots. Markets in Britain, France and Germany all suffered losses last week.

"The US appears to be more of a safe haven," said Jack Ablin, chief investment officer at BMO Private Bank.

Investors are trying to "cozy back up to the US where there is economic growth and where our economy is somewhat insulated from the geopolitical confrontations that are going on."

Economic data remained mostly positive. The ISM purchasing manager index for the service sector gave the highest reading in nine years, pointing to continued momentum in growth.

In earnings news, the Walt Disney Company and 21st Century Fox both scored strong quarters helped by their respective summer movie blockbusters Maleficent and the X-Men movie.

Fox also called off its campaign to acquire Time Warner after chief Rupert Murdoch concluded the price was too high. Murdoch`s company had initially offered some USD 80 billion in a swash-buckling move.

"The reaction in our share price since our proposal was made undervalues our stock and makes the transaction unattractive to Fox shareholders," Murdoch said in a statement.

Another deal which appeared to collapse was Sprint`s USD 32 billion offer for T-Mobile, failing in the face of US regulatory opposition.

Next week`s economic calendar is relatively light, but includes releases on US retail sales for July and industrial production for July. Retail behemoth Wal-Mart Stores also reports second-quarter earnings.