Why the Dow Fell Again Today

Phew. The market seemed to take a much-needed breather today after the Dow Jones Industrial Average (INDEX: ^DJI  ) suffered its worst drop of the year on Friday. Today's action was much more subdued -- the Dow declined slightly but both the Nasdaq and S&P 500 managed to eke out meager gains. Ultimately, the day could have been much worse -- the blue-chip index dropped more than 80 points at one moment before rallying to end the day slightly in the red.

Investors seemed to be in wait-and-see mode today as they look for signs of life from the global economy, and in particular Europe. The continent remains in very serious trouble, keeping investors cautious as Greece's possible eurozone exit and Spain's potential need of a bailout continue to be the main areas of concern. China's economy also continues to show weakness, and data today showed the country's non-manufacturing industries grew at the slowest pace in more than a year.

Here's how three major U.S. indices fared on the day:

Index

Change

Ending Value

Dow Jones Industrial Average -17.11 [-0.14%] 12,101.46
Nasdaq 12.53 [0.46%] 2,760.01
S&P 500 0.14 [0.01%] 1,278.18

Turning to individual stocks, JPMorgan Chase (NYSE: JPM  ) was the Dow's biggest loser today, dropping 2.9%. The world's largest bank by assets continues to be hit by the fallout of its shocking $2 billion trading loss disclosed last month. According to The New York Times, the company is expected to follow the recommendation of a small group of shareholder advocates and strengthen its board panel that oversees risk. The only problem: The message from the shareholders was conveyed (and until now ignored) more than a year ago.

Construction-equipment giant Caterpillar (NYSE: CAT  ) continues its precipitous drop, falling 2.6% on the day. The company was pulled down last week after poor forward guidance from mining-equipment maker Joy Global spooked investors. Caterpillar recently made a big bet on mining with its purchase of Bucyrus International, its largest acquisition ever. After being the second-best Dow performer for the first few months of the year, Caterpillar's stock is now down more than 25% in just the past three months.

It wasn't all bad for Dow stocks on the day, as Home Depot (NYSE: HD  ) managed to log the biggest gain, rising 1.7%. The stock has been one of the best performers on the Dow this year, climbing 16%.

Outside the Dow, Facebook (Nasdaq: FB  ) dropped 3% after Bernstein analyst Carlos Kirjner hit the stock with a $25 price target. Bernstein noted that Facebook's advertising revenue growth has seen a "rapid deceleration" in recent quarters and said, "We believe there is material risk that over the next 12 months investors will question Facebook's ability to achieve our forecasted 2013 revenues as near-term revenue growth decelerates." Facebook's stock closed today at $26.90.

The big picture
While it's fun to follow what happens with volatile stocks like Facebook, it's also important to not to get too worked up about what happens in the short term. The most successful stock picks are usually great businesses that grow over many years. Our analysts have uncovered one such company in our new report, "The Motley Fool's Top Stock for 2012." It highlights a company that is revolutionizing commerce in Latin America. You can get instant access to the name of this company -- and it's absolutely free.

Brendan Byrnes owns shares of Caterpillar. The Motley Fool owns shares of JPMorgan Chase, Facebook, and Joy Global. Motley Fool newsletter services have recommended buying shares of Home Depot. 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.


Read/Post Comments (0) | Recommend This Article (12)

Comments from our Foolish Readers

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.

Be the first one to comment on this article.

DocumentId: 1902786, ~/Articles/ArticleHandler.aspx, 4/24/2014 7:36:48 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement