How Ukraine Hurt the Markets (but Helped U.S. Fertilizer)

Like many bad things in life, the situation in Ukraine started with debt -- the country owes $9 billion this year that it doesn't have (here's some simple background). Recently, Ukrainian President Viktor Yanukovych nearly signed a deal with the EU for loans, debt relief, and econ cooperation, but he signed one with Russia instead. The result was his ouster from office, 70 dead, and riot scenes straight out of a Bruckheimer movie.

 

So what's the latest? Crimea. The Russian-speaking strategic peninsula is an autonomous republic (it's got it's own constitution) but is under Ukraine's control (its tax dollars go to Kiev). With Ukraine's western capital in turmoil, Russia's Olympic hockey-beaten president, Vladimir Putin, is supporting the largely ethnically Russian population by mobilizing Russian troops to its Crimean base. The EU and the U.S. have amped up their diplomacy game aggressively to halt the military escalation.

 

What about Wall Street? With Russia-versus-the-West tensions bringing back Cold War vibes, investors moved away from riskier assets. Financial firms are dependent on stable business activity worldwide, so shares of JPMorgan Chase (JPM -0.08%) and Citigroup (C -1.32%) both fell more than 1% Monday. Safe and steady U.S. government bonds gained instead. And Yandex (YNDX), the Russian Internet search engine with a market share in Russia twice the market share of Google's, suffered a 14% loss.

 

But the big price gainer is potash. Potash salt is a key ingredient in fertilizer (it's like the garlic in a good chicken Kiev dish). So with investors anticipating possible sanctions against Russia, a huge potash exporter, shares of North America-based PotashCorp (POT) climbed more than 0.6% Monday.

Cold weather = shrinkage. You don't need a Bloomberg terminal to figure out that sub-zero temperatures and blizzards keep people at home. American auto manufacturers General Motors and Ford both had fewer new-car sales in February compared with the year before. That's two straight months of shrinking sales after consistent growth most of the past few years.

Chrysler is bucking the trend, with Americans dying to get behind the new Jeep Cherokee SUV. Despite their "Made in Detroit" ad campaign, it's their Italian owner, Fiat, that's tipping back Peronis to celebrate. Chrysler is on an amazing 47-month run of sales gains, and it has become Fiat's American golden boy. 

Four-wheel drive was still selling big, too. Trucks, SUVs, and crossovers were leading in comparison with standard car sales, which dropped 14% for Ford in February. CEOs will continue to deflect analysts' tough questions to their chief executive weathermen until spring brings people back to dealership lots.

After weeks of hearing of the frostbitten U.S. economy in January, the Institute of Supply Management announced signs of hope for February. The research group's monthly report on manufacturing indicated a rise to 53.2 from 51.3 on its fancy monthly scale -- any reading over 50 is a sign of expansion in the manufacturing sector.

 

The takeaway is that the key damage of Mother Nature's attack on the U.S. economy was in the shipping numbers. According to the report, January deliveries had dropped sharply to their lowest level since 2011. If two polar vortexes don't stop your package from arriving (we're looking at you, 1-800-Flowers, for botching Valentine's Day), then The Weather Channel's aggressive coverage will.