US stocks to remain volatile over Crimea crisis

Flashing bearish signs in investor stock sentiment are likely to continue this week over political uncertainty in Ukraine and the resulting fallout owing to Russia’s role as Western Europe’s biggest energy supplier.

US stocks turned in their worst weekly losses since late January with the Dow Jones Industrial Average DJIA -0.27% finishing the week down 2.4%, and the S&P 500 index SPX -0.28% falling 2% to give up its short-lived gains for the year. The Nasdaq Composite Index COMP -0.35% declined 2.1% for the week but is still up 1.7% for the year.

Investors will be paying more attention to fallout from the Crimea vote more than the upcoming Federal Open Market Committee meeting or a number of housing data in the coming week, according to market strategists.

“Bullets trump everything else,” said Nicholas Colas, chief market strategist at ConvergEx. “The game’s not over on Sunday: It’s the first inning, not the end of the game.”

On Sunday, citizens of Ukraine’s ethnically Russian Crimea region voted on a measure to secede from Ukraine, setting up a return of the Black Sea peninsula to Russia. On Friday, U.S. Secretary of State John Kerry reiterated that the referendum is illegal and that the U.S. would not recognize its results.

Late Sunday, exit polls showed 93% of voters in Crimea chose to secede from Ukraine and rejoin Russia, as widely expected, according to the AFP. The White House immediately said the vote violates Ukraine’s constitution and was held under “threats of violence and intimidation from a Russian military intervention that violates international law.”

Uncertainty as to how the Crimean crisis will play out prevented the price of oil from falling even lower, Colas said. Without the Ukraine factor, oil should have settled closer to $90 a barrel than to $100 based on weak Chinese economic data last week.

Also telling was the U.S. government putting up 5 million barrels of oil for sale from the Strategic Petroleum Reserve last week, raising the question if the “test drawdown and sale” was politically motivated in light of turmoil in Ukraine and Libya. That move and a jump in supplies also served to drive down oil prices. Market Watch