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Global Data Demolishes the Dow

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With hopes of QE3 temporarily dashed following an uninspiring Fed statement yesterday, investors reacted to negative economic data in a much different fashion than last week. Rewind to one week ago, when markets rallied on the “pro QE3” economic data, which ranged from spiking jobless claims to skyrocketing Spanish borrowing costs. But with the widely-anticipated Fed statement behind us, similar economic data that came out today, which indicated contracting economic activity, wasn’t met with as warm a welcome. The damage? A 250-point tumble for the Dow Jones Industrial Average (INDEX: ^DJI  ) , making it the second worst trading day of the year, and one where only two of thirty Dow components closed higher on the day.

Around the Dow
Moving to individual stocks, it should come as no surprise that, on one of the worst trading days of the year, the two worst Dow performers -- Alcoa (NYSE: AA  ) and Hewlett-Packard (NYSE: HPQ  ) -- would  also be the worst performing Dow stocks of the past twelve months. Alcoa shares declined 4.2% today in response to economic data suggesting sluggish Chinese and U.S. manufacturing activity. Hewlett-Packard, though not as directly exposed to economic data today, declined 4.1%, as investors attempt to reconcile its place in the broader tech ecosystem going forward. News earlier this week, that Microsoft will be selling its new Surface tablet, puts the HP partner in direct competition for consumer dollars going forward. HP’s decline could also be attributed to today’s analyst downgrade of hard drive makers Seagate (Nasdaq: STX  ) and Western Digital (Nasdaq: WDC  ) . The downgrade was predicated on weakening PC trends, including year-over-year declines in laptop shipments in both April and May.

Patience is virtue
Iinvestors may not have to wait too long for another Fed-induced rally on abysmal economic data. All it takes is a quick trip to the Federal Reserve website to see that the FOMC meets again at the end of next month, a full two weeks quicker than the previous layoff we just experienced. So, while there will likely be some bumps in the short-term, as investors digest economic data without the mind-bending effects of QE3-mania, it’s important to remember that the Fed plans to “maintain a highly accommodative stance for monetary policy” going forward. And if history has taught us anything,  it’s “don’t fight the Fed.”

“Set it and forget it!”
The great infomercial personality Ron Popeil said it best when pitching his Showtime Rotisserie Oven, and I think the same saying can apply to long-term investing. But you have to choose the right companies -- ones with strong, sustainable business models sporting healthy dividends -- if you want to do it right. That’s why we’re offering our latest special report entitled: The 3 Dow Stocks Dividend Investors Need. Inside, we highlight three Dow titans that are perfect for a rock-solid long term portfolio. You can claim your copy of this FREE report today by clicking here now!

Brenton Flynn doesn’t own shares of the companies mentioned. The Motley Fool owns shares of Western Digital and Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. The Motley Fool has a disclosure policy.

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Read/Post Comments (1) | Recommend This Article (17)

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  • Report this Comment On June 21, 2012, at 8:37 PM, nolanryan wrote:

    "Dont hit your sister JP or you wont get to go out after dinner"

    Thats it exactly, shouldnt even have left your mothers uterus

    And yea they move you in and out so fast as a politician or ceo that you dont have time to realize youre not children and have zero utility in this position.

    And there are consequences inflating prices and driving people into debt, people kill themselves over debt and children die when basic resources which are in supply are driven beyond what they ccan afford or made to expensive to access because of oil

    Not a stretch and were talking hundreds of thousands a year for this pointless crap

    When people start losing they start thinging like people again

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Today's Market

updated Moments ago Sponsored by:
DOW 18,223.03 77.32 0.43%
S&P 500 2,151.33 10.17 0.47%
NASD 5,309.83 52.43 1.00%

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Related Tickers

10/24/2016 4:56 PM
^DJI $18223.03 Up +77.32 +0.43%
AA $26.86 Down -0.02 -0.07%
Alcoa CAPS Rating: ***
HPQ $13.97 Up +0.17 +1.23%
HP CAPS Rating: ***
STX $34.52 Up +0.02 +0.06%
Seagate Technology CAPS Rating: ****
WDC $53.52 Up +0.45 +0.85%
Western Digital CAPS Rating: ***