International Worry Causes Market Pause, But Many Assume It's Only Temporary

Samantha Sharf

Forbes Staff

Markets began trading in positive territory Wednesday before taking a nasty turn shortly after noon. The move lower started when news of a bigger than anticipated build in oil inventory hit and picked up steam as reports of violence in the Ottawa, Canada surfaced. Investors largely agree the downturn marks an expected, and even necessary, pause but one that will need additional information to dissipate.

The S&P 500 closed down 0.7% for the day at 1,927 points. The Dow Jones Industrial average was down 0.9% at 16,461. And the Nasdaq Composite was down 0.8% at 4,383.

^SPX data by YCharts

According the The New York Times, a gunman shot a military guard at Canada’s National War Memorial before entering the nearby Parliament building. Inside more shots were fired and another round was reported at a shopping mall. John Canally, chief Economic and investment strategist for LPL Financial noted that several hours after news of the shooting broke it remained unknown who was responsible for the shooting, causing market uncertainty. “It is unclear if this is a local issue or a global issue. Until markets can wrap their head around that they are going to assume the worst,” explained Canally. “If it comes to light in the next 24 hours that it was a local issue and not a global issue markets can refocus on earnings and global growth.”

On the earnings front investors agree things are looking up and because of that markets have been positive for the last four days. In our interconnected world, however, investors remain cautions as recession worries brew in Europe.

“Europe has a lot of challenges the U.S. didn’t or doesn’t face, they are right on the borderline of a recession or perhaps there,” said Bernie Williams, CIO of USAA Investment Solutions. “A lot of U.S. investors are looking at that and looking at U.S. companies to see what the impact on earnings or foreign exchange is. We are seeing some of those impacts. Overseas exposure has been the topic de jour of late.”

Yet, at the end of the day, Williams argues, investors will focus on corporate news and fundamentals.

“You have to remember where we came from,” said Canally. “We are up a good 6% or 7% off the lows from last Wednesday morning, we got a good dose of earnings news that calmed somewhat global growth fears. We have come a long way in a short period of time. Regardless of what today was you were due for some sort of a pause.”

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