It was a wild day in the market on Tuesday as the Russian ruble crumbled and stocks had a wild day after opening lower, surging higher, and closing at the lows of the day.
First, the scoreboard:
- Dow: 17, 068.9, -112, (-0.6%)
- S&P 500: 1,972.7, -17, (-0.8%)
- Nasdaq: 4,547.8, -57.3, (-1.2%)
And now, the top stories on Tuesday:
1. It was all about the ruble. Last night, the Russian central bank unexpectedly hiked interest rates to 17% from 10.5% in an effort to stem the decline in the value of the ruble, which got crushed on Monday. On Tuesday, the losses for the ruble got even worse, with the ruble falling to as low as 79 against the US dollar and making two days in a row of at least 10% declines in the ruble’s value.
2. With the ruble collapsing, many investors were having flashbacks to the Russian default of 1998. But in a note to clients, Kit Juckes at Societe Generale wrote that the differences between now and 1998 are more important than the similarities.
3. At noon eastern, retail foreign exchange platform FXCM closed trading in the USD/RUB currency pair that goes long US dollars and short Russian rubles. In a statement to Business Insider, FXCM said the decision was related to “most Western Banks” halting pricing of the pair.
4. The ruble is now the world’s worst performing currency in 2014, blowing past the Ukrainian hryvnia, which had been the world’s laggard. Some of the other major currency losers this year includes the Argentine peso, the Norwegian krone, and the Chilean peso.
5. The rate hikes from Russia were unexpected and dramatic last night, and according to a report from Russian-language business publication Vedomosti, one Russian bank manager said raising rates marked “the end of the banking system.”
6. Amid instability in the ruble, Apple suspended online operations in Russia. Apple told Bloomberg that its online store in Russia was made unavailable as the company reviews pricing.
7. The price of oil was volatile on Tuesday, with WTI futures falling below $US54 early in the morning before rallying back above $US57 a barrel near midday. Ultimately, WTI gave back some of its gains and futures settled at around $US55.50.
7. And while the market’s focus was on Russia on Tuesday, Markit’s flash manufacturing PMI report slipped to 53.7 in December from 54.8 in November, the lowest reading for the headline index since October 2013. We also got housing data via housing starts, which unexpectedly fell 1.6% to an annualized rate of 1.028 million. Building permits also plunged at an annualized pace of 5.2% to 1.035 million in November. Following the report, TD Securities’ Millan Mulraine said, “Overall, this was a disappointing report and it further underscores that the ongoing narrative of the housing sector recovery continuing to struggle for direction.”
8. Markets might’ve been distracted on Tuesday by Russia, oil, and the overall volatility in markets. But the week’s big event is coming up on Wednesday: the December FOMC meeting. We spoke with the college Fed challenge national championship team from New York City’s Pace University ahead of the meeting. And while the biggest debate leading up to the meeting has been whether or not the Fed will drop “considerable time” from its policy statement, Pace told us, emphatically: “No.”
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