(Repeats column initially published late on Friday)
By Rodrigo Campos
NEW YORK Aug 17 As headlines about an apparent
escalation of the conflict in eastern Ukraine hit traders'
screens, selling was the word on Wall Street. Once again,
though, for many it looked like nothing but another buying
opportunity in U.S. stocks.
Benchmark U.S. Treasury yields hit their lowest in 14 months
on Friday after Ukraine said its forces had attacked and partly
destroyed a Russian armored column that entered Ukrainian
The S&P 500 ended Friday down a mere fraction of a
point. The three major U.S. stock indexes posted a second
straight week of gains after a correction that evaporated
following a brief drop of 4 percent.
An escalation of the conflict in eastern Ukraine will likely
bring stronger economic sanctions against Russia from Europe and
the United States - and harsher retaliation from Moscow.
Business sentiment is already on edge in Germany as Europe's
largest economy deals with reduced trade with Russia. An index
of Russian equities has dropped 6 percent for the year so
Against that backdrop, U.S. stocks - backed by earnings -
still look like the best option for investors in developed
U.S.-based stock funds that invest in European equities have
marked nine straight weeks of outflows, according to Lipper, a
Thomson Reuters company. Flows into U.S. stock funds in that
time have come to about $3 billion.
"If you're concerned about increased tension in Ukraine,
that's the trade - at least for now," said Art Hogan, chief
market strategist at Wunderlich Securities in New York.
"We are the cleanest shirt in the hamper," he said of the
U.S. stock market.
During the selloff on Friday, the utilities sector remained
strong, rivaled only by energy stocks, with investors focusing
on high-dividend payers as U.S. Treasury bond yields fell.
Looking forward, though, unless something else happens to
upset markets, investors seem more focused on the re-emergence
of leadership from the healthcare, biotechnology and tech
sectors. The Nasdaq Biotech Index ended Friday up 0.9
percent, gaining 4.6 percent for the week.
Brian Reynolds, chief market strategist at Rosenblatt
Securities in New York, believes tech, healthcare and large-cap
biotechs are in position to lead the U.S. stock market higher
for the next several weeks. He sees the S&P 500 rising on Monday
if tensions do not become worse.
"If Russia does not escalate, stocks are likely to open
above the 1,960 they were at earlier today as people who put on
knee-jerk shorts cover," he wrote late on Friday.
At a 4.6 percent rate, revenue growth for S&P 500 companies
is expected to be higher than estimates going back to October
last year. Even as economic figures remain somewhat mixed,
investors are still positive about overall U.S. demand.
"These are horrible human tragedies and that's worthy of
mention every time this comes up," said Lawrence Creatura,
portfolio manager at Federated Investors in Rochester, New York.
"However, the economic impact (in the United States) has been
(Reporting by Rodrigo Campos; Additional reporting by Akane
Otani and Caroline Valetkevitch; Editing by Jan Paschal)