Dow plunges over 300 points, erasing its gains for the year

@FortuneMagazine

July 31, 2014, 2:28 PM EDT

Geopolitical worries weighed on investors Thursday, with the Dow Jones industrial average dropping 317 points and leading a broad market retreat that left the blue-chip index down for the year.

By the close of trading, the Dow had chalked up its biggest drop since February.

In addition to the Dow’s sharp slide, the S&P 500 index and the Nasdaq both fell 2% in afternoon trading. The Dow is now lower than where it began the year. In July, the index crossed the 17,000-point mark for the first time ever as broader market indexes hit multiple record highs.

The Chicago Board Options Exchange Volatility Index (VIX), known as the “fear index,” rose 27%, hitting a multi-month high.

Contributing to the market’s retreat: news late Wednesday that Argentina’s credit rating has been downgraded to selective default by Standard & Poor’s. The country’s second default in 13 years sent its Merval stock index plummeting Thursday afternoon.

There are also lingering questions over how the latest round of sanctions on Russia issued by the U.S. and Europe will affect the global economy, including the energy markets. Exxon Mobil XOM , which has a multi-billion dollar partnership with Russian company Rosneft, saw its stock drop 4% on Thursday.

Some investors attributed the day’s decline to fears that Federal Reserve may raise rates more quickly than expected. The possibility of an upbeat labor market report, due Friday morning, added to those worries.

U.S. companies could also feel sting of latest Russia sanctions

by
Tom Huddleston Jr." itemprop="author" class="article-byline-author"> Tom Huddleston Jr.

@FortuneMagazine

July 29, 2014, 7:54 PM EDT

President Barack Obama followed the European Union’s lead Tuesday in announcing a fresh set of economic sanctions against Russia over its involvement in the Ukrainian uprising, but some U.S. companies that do business in Russia could also see their businesses affected by the West’s latest punishment.

The most recent sanctions aim to put even broader pressure on the energy, finance and defense sectors of the Russian economy. The U.S. initiated specific sanctions on three financial institutions – VTB Bank, the Bank of Moscow and the Russian Agriculture Bank – as well as the United Shipbuilding Corporation, the U.S. Treasury Department said Tuesday.

One purpose of the sanctions put in place on Tuesday will be to cut Russia off from a supply of goods and technology that feeds the country’s energy sector. Bloomberg notes that multiple U.S. companies generate anywhere from 4% to 6% of their global sales by contributing to that supply chain – and are likely to take a hit after Tuesday’s announcement — including oilfield services companies such as Baker Hughes BHI , Halliburton HAL and Schlumberger SLB .

Also put in a precarious spot is Exxon Mobil XOM , which signed a huge deal with Moscow-backed oil company Rosneft three years ago to form a joint venture to extract oil and natural gas from the Arctic Ocean. Both companies have reportedly invested billions of dollars in the partnership, which now could be in jeopardy despite the fact that a drilling rig was already en route to the icy waters North of Russia from Norway last week.

The U.S. transportation industry could also be affected by escalating tensions between the West and Russia, as airplane manufacturer Boeing BA imports more than a third of its titanium from Russia to build its products and automakers such as Ford F and General Motors GM sell hundreds of thousands of cars in Russia every year.

Major food brands aren’t safe either, as fast-food companies McDonald’s MCD and Wendy’s WEN have recently come under fire from Russian officials. Meanwhile, PepsiCo and Coca Cola KO could both be worried about their own Russian operations, which have expanded rapidly in recent years. Coke has agreed to invest billions of dollars in the country in coming years, while Pepsi PEP paid $5.4 billion in 2010 to acquire Wimm-Bill-Dann, which one of Russia’s largest food-and-beverage companies and its biggest dairy producer.

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