What Caused the Dow's Biggest Crash of the Year

It's been a rough few days for the Dow Jones Industrial Average (INDEX: ^DJI  ) . After dropping nearly 1% yesterday, the Dow declined 1.65% in trading today, its worst loss since November.

Index

Change

Ending Value

Dow Jones Industrial Average -213.66 [-1.65%] 12,715.93
Nasdaq -55.86 [-1.83%] 2,991.22
S&P 500 -23.61 [-1.71%] 1,358.59

Just over a week after ending its best quarter since 1998, the Dow has now declined in five straight trading days. The sell-off began last week, when the minutes from the Federal Reserve's latest meeting led investors to believe that there will probably be no additional stimulus in the short term. Then, a disappointing U.S. jobs report showed that U.S. employers added 85,000 fewer jobs in March than expected. Because of holidays, the markets didn't digest the report until Monday in the U.S. and today in Europe.

On top of disappointing U.S. jobs numbers, renewed concerns over European countries' debt loads helped push the Dow down. The Stoxx Europe 600 Index dropped 2.5% today to close at a six-week low. Spain, in particular, is becoming more and more of a worry for investors on both sides of the pond. Spanish bond yields are at their highest levels this year, and Spanish stocks have hit their lowest levels in three years.

Biggest loser
As is many times the case with market sell-offs on macroeconomic news, Bank of America (NYSE: BAC  ) was the biggest loser on the Dow today, dropping a whopping 4.37%. The company is one of the most sensitive to the broad economy on the Dow, along with Caterpillar (NYSE: CAT  ) , which dropped more than 3%. Bank of America has now dropped more than 10% in the past five days alone, but amazingly it's still up more than 50% year to date.

Outside the Dow, one of the biggest losers was Best Buy (NYSE: BBY  ) . The company's stock plummeted nearly 6% on the day after the announcement that its CEO, Brian Dunn, had resigned amid a probe into his personal conduct. Dunn's resignation is the latest blow for the big-box retailer, which struggled through subpar holiday sales and what many see as a failing business model.

Biggest winner
Interestingly, the biggest winner on the day is a company that declined nearly 3% during normal trading hours today. That company is Alcoa (NYSE: AA  ) , which reported earnings after the closing bell today. The aluminum giant surprised analysts with a first-quarter profit of $0.09 per share, beating analyst expectations of a $0.04 loss per share. Alcoa cited growth in all global end markets and reaffirmed its forecast that aluminum demand globally will grow 7% in 2012. Alcoa's stock is up more than 5% after hours, more than making up for today's loss during normal trading hours.

Alcoa's surge after hours today is one example of why investors must keep close tabs on their favorite companies during earnings season. Our all-star team of analysts has included five of their favorite companies in our brand-new free report, titled "5 Stocks Investors Need to Watch This Earnings Season." Included in the report are the names of a natural gas company, a technology company, and a rapidly growing retailer that could be poised to pop after they report earnings. Get access to the report -- it's free!

Brendan Byrnes owns shares of Caterpillar. 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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