NEW YORK (Real Money) -- You look at the charts. You study the fundamentals. And you get the same thing. Even on an up day like this one, the market's going to distinguish between stocks that get hurt by a Ukraine-Russia conflict and stocks that are unaffected by it. We are now well into discounting a protracted conflict on the Ukraine border without any sign of a diplomatic solution.
It's been a brutal period for some stocks and halcyon days for others. The S&P 500 keeps bumping into new highs because many of the U.S.-based international companies we had been banking on to produce multi-year growth, as they finally started getting revenue relief, are now rolling over and that money's pouring into domestic winners. It is true that many of the internationally-oriented stocks have rallied since the downing of flight MH-17, the benchmark of the international downturn, but they are stalling out and you need up days like today to trim them.
It's logical. The worldwide companies' estimates could now prove to be too high because of a combination of a recession in Europe and a too-strong U.S. dollar.
Read More: 7 Stocks Warren Buffett Is Selling in 2014
Before I get to what's working, let's just rule out what Europe's done for us. To do this we just need to go back to when Europe was first going awry back in 2012. We realized that tech, which has such a heavy emphasis on Europe, would not be able, en masse, to make it numbers. Now there are some special situations playing out here, notably the return of the PC to growth, which you can monitor with Hewlett-Packard (HPQ) , even it has a ton of Europe. And some of the cloud plays can still brag of plus 60% growth rate (see Splunk (SPLK) ). But I don't think the group will be able to transcend Europe when there are so many companies that do not have any Europe to choose from.
I wish Europe were, like in 2012, only causing problems for the industrials. No such luck. The European Central bank has so manipulated rates and the deflation is so powerful that the Italian 10-year trades at 2.4% and the Spanish 10-year clocks in at 2.2%. The German 10-year is a joke at below 1%. Anyone who knows how to handle a wire instruction is sending money here, so the 10-year Treasury is still offering way too much of a yield and the trade has been and remains to be lower not higher, rates. That aberration, given our job growth, seems always on the verge of correcting, but our budget deficit stands out vs. Germany's perfect balance sheet and demand from China, Europe and, yes, Russia, and will not let those rates lift.
Of course, that means continual buying of the dollar, too. That's why the banks and the big drug and consumer packaged goods companies don't really have much of a chance to have anything other than periodic flares higher.
I think these sectors are so problematic that they are going to stay under pressure and go down every single time we get a ratchet in tensions. That means pretty much daily. It's a huge issue and I think that the white flag has to be run up for the group as we have had to do for Action Alerts PLUS after fighting the tide for too long.