5 reasons the market is seeing red

Geopolitical crises are taking a toll on stocks as we head into the seasonally weak month of August.

By MSN Money Partner Jul 31, 2014 12:12PM
A trader works on the floor of the New York Stock Exchange minutes after a Federal Reserve announcement on January 29, 2014 in New York City
© Spencer Platt/Getty ImagesBy Bob Pisani, CNBC

Stocks are sharply lower, with European stocks trading ugly right from the start. Germany is down more than 1 percent, and is lodged at the lowest levels in nearly three months.

Several factors are moving our markets, including:

1) The rhetoric in Ukraine is getting downright vitriolic. The Ukraine Prime Minister, Arseniy Yatsenyuk, said Russia was seeking to "revise the outcomes" of World War II by seizing the Crimean peninsula and fomenting war.

We are also seeing some global companies like BP (BP) talking about long-term impact from the Ukraine crisis.

2) Then there was Adidas (ADDYY), which lowered its full-year profit expectations, citing increasing risk stemming from Russia. The reduction was big: it now expects profit of $650 million, prior guidance was between $830 and $930 million, more than 20 percent lower. It wasn't just Russia: they also cited a generally "poor retail sentiment."

3) Portugal is also weak, down 3.5 percent. Late yesterday, Banco Espirito Santo, Portugal's largest bank, posted a $4.8 billion loss -- the largest ever for a Portugese bank. Given that their capital cushion was only about $3 billion, they are going to have to raise capital. Lisbon's stocks benchmark is at its lowest level since October.

4) We saw the 10-year yields spike to over 2.6 percent when the Employment Cost Index came out higher than expected (up 0.7 percent) -- the highest jump since 2008. The ECI details changes in the costs of labor for businesses, and it's more fodder for hawks on the Federal Reserve's rate-setting board to hike rates sooner.

5) Argentina's battle against default is highlighting emerging market risks (again).

And, of course, we have the seasonal pundits. We are entering August, a seasonally weak period. August has been down four of the last five years.


Six initial public offerings (IPOs) priced, the largest being Synchrony Financial, the former arm of GE Capital. The company priced 125 million shares at $23, and are the largest private credit card issuer (think store-branded cards for retailers like Wal-Mart (WMT).

The good news: at $2.8 billion, Synchrony is the biggest IPO of 2014 thus far. Ally Financial (ALLY) earlier in the year was $2.4 billion.

The bad news: pricing was at the low end of the price talk of $23 to $26. Some have argued that Synchrony's assets are lower-quality than those of competitors like Capital One Financial (COF), but loan growth is improving, and defaults are lower for all the card holders.

Another IPO is Healthequity, a platform for managing health savings accounts, which priced 9.1 million shares at $14, well above the price talk of $10 to $12. Four other IPOs priced, which were:

  • Catalent, a global provider of oral, injectable and respirator drug delivery technologies. They priced 42.5 million shares at $20.50, in the middle of the $19 to $22 price talk.
  • Avalanche Biotechnologies priced 6 million shares -- more than expected -- at $17, at the high end of an upwardly revised range of $16 to $17.
  • Rare disease biotech Bio Blast Pharma priced 3.2 million shares -- slightly less than expected -- at $11, at the low end of the $11 to $13 range.
  • Gene therapy biotech Vascular Biogenics priced 5.4 million shares at $12, below the $13 to $15 price talk.

More from CNBC

Jul 31, 2014 12:39PM
It's really about the Federal Reserve.  With the latest GDP and inflation reports, it is clear that Yellen and the boys are trapped in a shrinking box.  Take away the monetary stimulus and you're left with a stock market that is hugely overpriced.
Jul 31, 2014 1:12PM

The reason that the stock market is tumbling is that the economy is weak and the easy money government policies cannot go on forever. If you look at unemployment, the "official" numbers are in the 7% range which is not accurate. That number is fudged to make it look better than it really is. The real unemployment number is in the 15-20% range(probably closer to 20). GDP and other key economic factors such as housing are weak also. The only thing pumping up the market is the government's easy money which they are intentionally doing to keep the market from crashing. This is artificial and temporary at best. The market is well over valued and a significant downturn is virtually guaranteed. I am not talking about 10%, it will be more like 30% or higher.

I wish everyone luck. You will need it.

Jul 31, 2014 12:51PM

Vote out lying Democrats in November!

(If you like you doctor, you can keep your doctor.  If you like your health care plan, you can keep your health care plan.  You will save $2500/year)  ALL LIES~!!!!

Repeal Obamacare in December!

Jul 31, 2014 1:01PM

MSN already making excuses as to why the market might not do well.  MSN has been doing nothing but that since obama got into office.


5.5 years later of this recovery and its still always excuses and not policy as to the root cause of the non recovery

Jul 31, 2014 1:53PM
The USA continues to throw money at every problem in the world. Can someone tell me if at anytime was a problem solved by throwing money (our tax dollars) at it?
Jul 31, 2014 1:36PM
 1. The
 2. Federal
 3. Reserve
 4. Bank
 5. is a Privately owned bank full of GREEDY PIGS !!! 
 They OWN OUR POLITICIANS that are under there LYING BOOT HEELS.  
 Go print some more FAKE MONEY to make us all SLAVES to the DEBT for EVER..
Jul 31, 2014 1:56PM

  This is the new world order,

First you create dollars from nothing, whether from inflating home values, printing dollars or just borrowing future dollars.

Then the dollars you just created mysteriously vanish over night, where did they go ? where did they come from ? were they even real in the first place ?

All I know for sure is that a small number of people are getting very rich under this system while we all argue as to who's to blame. And the Grand Illusion just Rambles On and On and On.

Jul 31, 2014 1:39PM
There are 6 reasons.......number 6 is idiot humans running around like pi$$ ants...the slightest problem and they panic....soon the BIGGEST bubble ever will burst and we go back to actually earning our money instead of profiting off someone else's misfortune...maybe all the speculators will jump off the same building at the same time!
Jul 31, 2014 1:04PM
august is a seasonally weak month?  Why?  MSN can't blame it on the weather so I guess geopolitical is the new excuse
Jul 31, 2014 1:18PM
It was a matter of time that the reality of how poorly the job market is doing, and not Obama's lies on how well the economy is doing, was finally going to surface! Want to fix the economy? You first have to impeach Obama and get rid of his wasteful spending, like Obamacare!
Jul 31, 2014 1:09PM
Just more of the same sht from George W. Obama. Are you voters fed up yet? My guess is NO. Nothing will change but the faces come January. The R & D's will still get 99% of the votes. It doesn't have to be that way. Our problems were caused 100% by the R & D's yet they will still get 99% of the votes. Great job. Lots of pride there.
Jul 31, 2014 1:38PM
Obama cannot prop up the market(with our tax money) forever. It is just a question of time. I think they were hoping that the market would outlast Obamas term and then they would blame the correction on someone else....This admin has created a stock market bubble....and bubbles burst...that is a fact. Even now years after the fact the liberals are still trying to lie their way with charges that someone else caused the banking and housing failure...They will lie about anything and everything. Honestly, dont you understand that it was the left that tried to give housing away to people with little earnings and income?? Obama was directly involved in threatening banks in his role of representing ACORN.
Jul 31, 2014 1:46PM
Floating on cheap borrowed money. 
Jul 31, 2014 1:55PM

People are catching on, finally. With the constant devaluing of the dollar since Obama took office, unemployment NOT getting better despite the manipulated numbers trying to make it appear so, rampant inflation on EVERYTHING that we MUST buy, food, energy, etc., a POTUS that is more concerned with campaigning rather than changing course in light of his EPIC FAILURE on domestic and foreign policy, a concerned citizenry is finally waking up to reality and this is being reflected in real world numbers that are taking their toll. To date, Obama is ONLY concerned with putting off the disaster that is looming from his failed policies until AFTER the 2016 election so if a Republican takes office and begins to return us to sanity, allowing the pain which has been put off for 8 years to occur so that a healthy economy can once again emerge, the Democraps can claim what a disaster the GOP is, when in reality every day that goes by under Democrap leadership the problems multiply and will cause additional pain and hardship to undo the damage.

At this point our only means of mitigating the damage is to begin reversing this Socialist Trend NOW by getting a GOP controlled Senate to STOP Obama from doing further harm and preparing the market for a controlled reset to our capitalist system and away from Socialism ! ! ! VOTE OUT EVERY DEMOCRAT, NOW ! ! !

Jul 31, 2014 1:25PM

As Brutus says, it's all about the FED.  Sure, there may be a triggering event like the Ukraine or Portugal but it all boils down to the market has been pumped up by devaluing our currency and that is in the process of ending.  Everyone with stocks are feeling rich right now, same as the people with big houses and big mortgages did a few years back.  When it unwinds, the people that got out in time will do well and those who were the last to buy in will be screwed.  Nothing created, just money going from one pocket to another. 

When Argentina defaults expect some dominos.

Jul 31, 2014 2:01PM
What goes up always comes down ... with the help of the fed.
Jul 31, 2014 1:55PM
So the fact that We've raised taxes significantly, added massive new regulations and are slowing down on the money printing has nothing to do with it?
Jul 31, 2014 1:15PM
#1 is the concept that a global market will be good for anyone other than the ultra rich. the rest of us will be bounced around by economic areas that should have no effect in the  United States. the only logical conclusion from a global eceonomy is a global wage and I have no interest in making the same as the untouchable caste in India,etc.Globalization will only work with socialism or communism,and I for one am not interested, unless everyone is, and that aint gonna happen.
Jul 31, 2014 2:29PM
Couldn't have anything to do with the fact that we've been living in OZ for the past 5-6 years with the Fed ARTIFICALLY propping up the market. In a weird sense we were taking $$ from one pocket, putting it in the other and feeling good about it. Problem is, the hand doing the transfer wasn't doing it for free. The foundation of a perfect con. If you haven't been reading the news the super rich have all but regained their wealth lost in 2008 -and this under Democrat control. So who's really for the little guy? Have you regained your wealth lost in 2008? I bet not.
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