Why the Dow Fell Today

Following yesterday's big 1.23% rally that made up for nearly all of last week's losses, the Dow Jones Industrial Average (INDEX: ^DJI  ) finished slightly down today. The index was flat until late in the day, when there was a small sell-off of stocks, and there were two pieces of economic news today that the market largely ignored.

Index

Change

Ending Value

Dow Jones Industrial Average -43.90 [-0.33%] 13,197.73
S&P 500 (INDEX: ^GSPC  ) -3.99 [0.28%] 1,412.52

At 9:00 ET this morning came the report from the Case-Shiller home-price index that U.S. home prices fell 0.8% in January, versus expectations of a 0.2% rise. Overall, prices are down 3.8% year over year, slightly below analysts' expectations of a 3.7% fall. With such a slight gap between expectations and actual numbers, investors were unfazed.

At 10:00, half an hour after the market opened, the Conference Board announced that its consumer-confidence index, which gauges consumers' views of the economy, fell from 71.6 last month to 70.2 in March. Analysts had expected a level of 71.5. A level above 90 indicates strong growth, while a reading near 70 indicates weak but steady growth.

Top winner
Pfizer
(NYSE: PFE  ) was today's top Dow stock, rising 1.53% to $22.50 after a Goldman Sachs analyst said Pfizer CEO Ian Read is open to a further breakup of the company in the next few years. Pfizer currently has plans to spin off or sell its animal health and nutrition business. In August, Pfizer sold its capsule business to a private-equity firm. Spinoffs usually occur when companies believe the market is undervaluing the sum of the parts of their business and that they'd be valued higher as standalone businesses. Brian Orelli follows pharmaceutical stocks for the Fool, and in January he let Pfizer investors know what to look for in 2012.

Top loser
Since passing the Federal Reserve's stress test last Tuesday, Bank of America's  (NYSE: BAC  ) stock has been on fire, rising 23% since then. But today it was the worst-performing Dow stock, down 3.32% to $9.60. The bank was one of 22 Dow stocks to finish the day down, but it fell the furthest after a downgrade from an analyst at Robert W Baird. Dropping the stock from "buy" to "neutral" as it was sitting near $10 per share, the analyst said that without "the benefit of much higher rates, we have a hard time seeing meaningful upside to intermediate-term EPS potential."

Our analysts are not so dour on Bank of America. Fool analyst Anand Chokkavelu believes Bank of America could hit $20 and explains how he sees it happening. Fool analyst John Maxfield also believes now is the time to buy Bank of America.

The best approach
Watching the broad market each day is exciting, gut-wrenching, and stressful, but investing doesn't have to be. If you're in the mood to pick up a few great companies to buy for the long term, The Motley Fool has created a brand-new free report: "3 Stocks That Will Help You Retire Rich." It features three stocks to help you build a smarter retirement portfolio. Get access to the report and find out the name of these three companies. The report is free but won't be forever, so check it out today.

Dan Dzombak holds no position in any company mentioned. The Motley Fool owns shares of Bank of America. Motley Fool newsletter services have recommended buying shares of Goldman Sachs and Pfizer. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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  • Report this Comment On March 27, 2012, at 8:12 PM, aquiyo wrote:

    Why the dow fell? Maybe we are stupid and don't recognize the big interests manipulating our savings. We have our little 401K's ad they play with it. How about if we just pull out of the market and let them out cold. Is time to act not seat and wait.

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