The S&P 500 (NYSEARCA:SPY) closed at a new record high Friday, but again it was another stumbling, directionless performance. Markets opened higher, perhaps relieved that Q4 GDP was not much worse than forecasts, but then declined on news of heightened tensions in Ukraine. Gains were recovered into the close on late buying as investors realized that despite social media hysteria, a world war is not imminent.
Data today was muted. GDP growth for Q4 was revised down sharply from 3.2% to 2.4%, a marked contrast to Q3's 4.1%. Still, today's number was pretty much as forecast so there were no surprises for the market. Within the report were signs of weaker consumption, which remains a worrying aspect of the US economy; without a strong consumer it will be difficult to maintain steady growth.
Of course, Q4 seems a while ago now, and markets rarely move much on such data, but it seems that figures for 2014 are currently incapable of having significant impact. The usual citations of cold weather were used for the much weaker than expected increase in US pending home sales: January's sales rose +0.1% while expectations were for +1.0%. Housing data has been very weak this year, but there is a reluctance to conclude that higher mortgage rates are strangling the recovery and instead everyone seems to be waiting until weather is no longer an acceptable excuse before worrying.
Yet there was some brief panic late on Friday afternoon following news of Russian troops illegally entering Crimea in Ukraine. We've seen this before when Russia rumbled into Abkhazia in Georgia, but while it is a distressing geopolitical event, it remains localized and far away from impacting US stocks. Stern rhetoric will likely come from the US, but the prospect of this developing into an international conflict is remote. Washington's appetite for military action is extremely low as evidenced by the Syrian confusion last year, and going head-to-head with Russian forces is not on the cards at this time.
So when markets digested the developments late this afternoon, stocks rebounded into the close, reclaiming gains. Bond yields actually finished higher on the day, with the yield on the Treasury 10-year finishing ~2.65%, showing no signs of increased safe haven buying.
Markets are currently in a state in which there are few catalysts to push them on another strong run. February was a strong month for the S&P 500, gaining +4.3%, but this rally has done little more than recover January's losses. Markets have realized that things haven't worsened since the new year began, but there has been nothing to generate optimism. With US economic data being discounted with weather excuses, there are few positive catalysts on the horizon.
It has seemingly reached the stage where corporate performance will need more than cost-cutting measures. The sector needs a strong economy to boost revenues and, with data currently meaningless, markets could be in a flux for a while.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.