The Dow Plummets as the Global Economy Weakens

Just yesterday, Federal Reserve decided it would take the less-direct approach of supporting the economy by continuing Operation Twist. Ben Bernanke also explained that policymakers are prepared to take additional steps to help the economy if the situation worsens. Well, that coupon might need to be cashed sooner rather than later, as the broad markets are plummeting along with crude oil prices.

Index

Gain/Loss

Gain/Loss %

Dow Jones (INDEX: ^DJI  ) (180.81) (1.41%)
S&P 500 (22.01) (1.62%)
August WTI Futures (2.11) (2.59%)

Source: Yahoo! Finance

The global economy is springing leaks all over the place, as manufacturing is slowing, hurting both emerging and developed nations. Stocks and commodities plunged due to reports showing business activity across the eurozone shrinking yet again, extending the streak to five straight months. To compound the problem, manufacturing in China is expected to contract at levels not seen since the global financial crisis, according to HSBC Holdings. With telling signs of a global economy ailing coupled with Fed officials lowering the GDP growth outlook for 2012, investors decided to move into the safety of U.S. Treasuries.

With money shifting into benchmark 10-year notes, let's take a look at the sectors experiencing heavy sell-offs.

Energy
It is no surprise that energy is taking a splash, as this sector is highly cyclical and its performance is closely aligned with economic growth. In the Dow, ExxonMobil (NYSE: XOM  ) and Chevron (NYSE: CVX  ) are pushing a 3% drop as both West Texas Intermediate and international Brent crude prices are getting slammed. Typically, big oil can ride out days where crude plummets, but when both U.S. and global prices tank, the diversified oil companies join the fold and get punished as well.

Technology
Red Hat
(NYSE: RHT  ) shares are falling, down 5.5%, due to weak performance and a disappointing outlook. The open-source Linux and software provider reported billing revenue growth of 16%, failing to meet analyst expectations of 20% to 22%. To make matters worse, the company is expecting revenue for this next quarter to drop from $330 million to $320 million.

Qualcomm (Nasdaq: QCOM  ) is down 2.73% due to poor economic news, especially slowing Chinese growth. Qualcomm has increasingly relied on China as its source of revenue growth; it currently supplies over 30% of sales. China's slowing growth will adversely affect Qualcomm, as the computer chip maker relies on smartphone growth, collecting 3% to 5% of the wholesale price for CDMA devices.

Takeaway
Today is a perfect example of how quickly good news can be discarded. The past week the markets increased on expectations of the Fed boosting the economy through extended stimulus measures. With increased instability expected in the market, now is a great time to check out the Motley Fool's special report: "3 Stocks That Will Help You Retire Rich." This free report will list three remarkable companies as well as offer great advice on how to invest to secure a comfortable retirement. Get your free report now

Joel South owns shares of no company listed above. The Motley Fool owns shares of Qualcomm. Motley Fool newsletter services have recommended buying shares of Chevron. The Motley Fool has a disclosure policy.
We Fools may not all hold the same opinions, but we all believe that
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DOW 17,356.87 288.00 1.69%
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Related Tickers

12/17/2014 4:31 PM
^DJI $17356.87 Up +288.00 +1.69%
DOW JONES INDUSTRI… CAPS Rating: No stars
CVX $106.02 Up +4.32 +4.25%
Chevron CAPS Rating: ****
QCOM $72.21 Up +1.90 +2.70%
Qualcomm CAPS Rating: ****
RHT $59.48 Up +1.25 +2.15%
Red Hat, Inc. CAPS Rating: ***
XOM $89.02 Up +2.61 +3.02%
ExxonMobil Corp CAPS Rating: ****

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