The Dow Drops Yesterday's Gains

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If there's one word that sums up the broad markets lately, it's fear. Investors are experiencing distressing emotions, leading to dramatic market swings. Once again, the storyline of the day comes from the eurozone, where Spain's banking sector is causing concern because of diminishing deposits. As European debt issues are once again front and center, investors reacted by opening the hatch and unloading shares. The end result is that the Dow Jones Industrials (INDEX: ^DJI  ) plunged 1.28%, erasing yesterday's sizable gains.

Bond yields in Spain and Italy increased today, intensifying fears that Greece would split with the EU, which could also lead to losing other members. Any change to the status quo could have a detrimental effect on the global economy, ranging from slowing growth in the eurozone to the extreme of a double-dip global recession. As news is disseminated of a possible split, companies with global exposure are hit the hardest with regard to share price.

The hard hit
Concerns of slowing demand of course are going to take a huge bite out of energy demand. Today the price of oil dropped 3.75%, ending up well under $90. This enormous decrease in crude affects the bottom line for upstream energy companies. Dow components ExxonMobil (NYSE: XOM  ) and Chevron (NYSE: CVX  ) both finished the day down around 2.6%. Materials and machinery were also hit hard, with Alcoa (NYSE: AA  ) losing 3.49% of its share price and Caterpillar (NYSE: CAT  ) dropping 2.53%. 

The news being circulated should be followed so investors can make long-term decisions. However, for the long-term investor, the daily noise should not be a trigger to sell valuable companies. According to CNNMoney's Fear & Greed Index, which is based on seven equally weighted technical indicators, the market is being driven by extreme fear. The point of this index should be that as fear controls the market and investors liquidate positions and put their money in safer securities, prices drop and great deals can be found.

Over the past few years, the echoing theme frightening investors has been European debt issues. With elections around the corner, news reports will only increase the market volatility, meaning it's of vital importance to stick with the investments you purchased for the long term. Conversely, invest in strong companies you've been following if the price is right. Don't follow the crowd and let fear dictate your decision-making. If you are looking for smart long-term investments, the best place to start is finding strong and established firms that provide income in the form of dividends. For this reason, our top analysts have selected nine great dividend stocks that will benefit any investor's portfolio. These companies are detailed in this free report, so check it out now, because it will only be offered for a limited time. 

Joel South owns shares of no company listed above. Motley Fool newsletter services have recommended buying shares of Chevron. 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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DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

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Related Tickers

10/21/2016 4:47 PM
^DJI $18145.71 Down -16.64 -0.09%
AA $26.88 Up +0.19 +0.71%
Alcoa CAPS Rating: ***
CAT $86.33 Down -0.30 -0.35%
Caterpillar CAPS Rating: ***
CVX $101.30 Down -0.57 -0.56%
Chevron CAPS Rating: ****
XOM $86.62 Down -0.59 -0.68%
ExxonMobil CAPS Rating: ****