3 Stocks That Rained on the Dow's Parade

As if we had any doubt after the beginning of May brought huge declines to the stock market, volatility is back in a major way. Today's market action shows just how jumpy stocks have become, with the Dow Jones Industrials (INDEX: ^DJI  ) falling at the open, rising in mid-morning, and falling throughout the afternoon -- only to do another late-day recovery that finished with the average up 34 points. The broader market wasn't as strong, with the Nasdaq Composite actually losing ground for the day.

Even though the Dow recovered, many Dow components did not. Cisco Systems (Nasdaq: CSCO  ) was the Dow's big loser today, falling nearly 2% and adding to its huge losses so far this month. With the company convinced that the overall environment for enterprise spending is holding it back, Cisco can point to results like those of NetApp as confirmation of its assessment of slowing growth throughout the industry.

Caterpillar (NYSE: CAT  ) lost more than 1% on the heels of more bad news about China's slowing economic growth. HSBC's purchasing managers index covering the Chinese manufacturing industry fell further into the range suggesting a contraction, sending mining companies Joy Global (NYSE: JOY  ) and Cliffs Natural Resources (NYSE: CLF  ) down sharply. Although mining is only part of Caterpillar's business, it nevertheless has been an important part of the Dow component's growth. If China doesn't reaccelerate soon, then Caterpillar could fall further from its recent highs.

Finally, JPMorgan Chase fell almost 1%. With Wall Street's major banking and investment firms taking their respective turns on the hot seat over issues ranging from questionable foreclosure practices to the mishandling of the Facebook IPO, JPMorgan still hasn't managed to push its multibillion-dollar failed trade firmly into the background. As long as JPMorgan keeps its derivative position, it will remain vulnerable to both further losses and criticism from investors.

Don't stop believin'
The Dow's late-afternoon rallies have been interesting, but you shouldn't pay much attention to them over the long run. Instead, get yourself in a longer-term mind-set by reading about The Motley Fool's chief investment officer and his pick for the Fool's top stock for 2012. It's all in our free special report, which you can read for free to discover the name of this stock.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. You can follow him on Twitter, @DanCaplinger. The Motley Fool owns shares of Joy Global, JPMorgan Chase, and Cisco Systems. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 25, 2012, at 2:18 AM, BradReeseCom wrote:

    Hi Dan,

    If I was a Cisco shareholder I'd be very concerned that 100% of Cisco's $550 million in Q3'FY12 stock buybacks went to support John Chambers' dilutive management compensation practices.

    Even after buying back 27 million Cisco shares during Q3'FY12, Cisco shares used in its per-share diluted calculation increased by a staggering +55 million shares!

    Cisco's taking shareholder cash and putting it into the pockets of the executive team. No wonder Cisco CEO John Chambers has no intention of EVER retiring (even after 17 very, very long years as Cisco's CEO).

    I mean, Chambers continues to take out hundreds of millions of dollars in Cisco shareholder cash for himself, so he's definitely got it made and he knows it:

    http://www.bradreese.com/blog/5-24-2012.htm

    Think about what's going on here, Cisco CEO John Chambers bought a $50 million private jet with his own money and what's really sweet is that Chambers' has been making Cisco shareholders pay to him $2 million per year in "expenses" for his "business use" of the jet that he personally owns:

    http://www.networkworld.com/community/node/45634

    Chambers has got it totally made!

    Sincerely,

    Brad Reese

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