Investors are having a hard time holding onto risk as the likelihood that the standoff between the West and Russia will ultimately lead to some ground conflict. US stocks gave up earlier gains after the Russian press confirmed reports of the evacuation of residents from East Ukraine to Russia and then turned negative after reports over an explosion in Donetsk. The US believes the risk is very high that Russia will invade Ukraine and that means Wall Street will remain jittery until we see a major de-escalation, which now seems unlikely. The risks of regional warfare are growing and that is a difficult environment for risk appetite. With US stock markets closed on Monday for President’s Day, many investors are preferring to hold cash given the intensifying situation at the Ukraine border.
The housing market saw an unexpected surge of buying in January as buyers tried to lock in mortgage rates. January home sales rose 6.7% , much better than the expected drop of 1.3% and prior decline of 3.8%. Inventories fell to a record low, which explains why building permits impressed so much yesterday. Next month’s existing home sales report will likely come back to earth as this one was pumped up by an unusual amount of cash buyers and surging borrowing costs will start to weigh on buyers.
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