Why the Dow Is Plunging

It's been a day of steady declines as poor economic data came out. Initial claims improved, but are still a far cry from good, and the U.S. manufacturing sector showed slowing growth. It's a better showing than China, which saw its manufacturing shrink this month. And new data confirms the eurozone's contracting economy is as bad as you think. Enter Goldman Sachs, which seemingly gave the markets a push over the edge after recommending investors short S&P 500.

That said, let's take a closer look at how the three major indexes are faring.

Index

Gain/Loss

Gain/Loss %

Intraday Value

Dow Jones Industrial Average (INDEX: ^DJI  )

(164.08)

(1.28%)

12,660.31

Nasdaq

(51.05)

(1.74%)

2,879.40

S&P 500

(20.27)

(1.50%)

1,335.42

Source: Yahoo! Finance as of 1:35 p.m. EDT.

The major U.S. indexes have given up ground all day, with the Nasdaq leading the charge into negative territory. All of today's chaos has the market's "fear index" soaring back in a big way; the VIX (NYSE: ^VIX  ) is up over 10% today, at least temporarily breaking out of its seemingly never-ending decline. With the Federal Reserve content to merely maintain the status quo, we may be in for a long summer.

No sector is getting hammered as badly as energy today. Even the big names are feeling it: Dow components ExxonMobil (NYSE: XOM  ) and Chevron (NYSE: CVX  ) are two of the index's worst performers, down 2.8% and 2.4%, respectively. Small players like Kodiak Oil & Gas (NYSE: KOG  ) are feeling it worse. Its shares are down 7%, as lower oil prices have a greater impact due to the company's higher-cost operations. If global economies are cooling -- and China's manufacturing decline is probably the most troublesome news here -- then commodities will see less demand. Oil has dropped under $80 per barrel for the first time since last fall, and the average price at the pump -- currently $3.47 per gallon -- is expected to continue to decline even into the summer months.

Oil companies are not without their ups and downs due to the cyclicality of their business, but dividends compensate investors all year long. The Dow is loaded with companies with solid dividend payouts and highly sustainable business models built for the long haul. The stocks highlighted in The Motley Fool's new special FREE report, "The 3 Dow Stocks Dividend Investors Need," all have an X factor that makes them stand out from their illustrious Dow peers. Download it now, for free.

David Williamson holds no position in any company mentioned. Click here to see his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Goldman Sachs and Chevron. The Motley Fool has a disclosure policy. We Fools may not 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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