Manufacturing Decline = Dow Drop

After finishing the previous quarter with a spectacular finale on Friday, the second half of 2012 began quietly. At noon, the Dow Jones Industrial Average (INDEX: ^DJI  ) had slid 0.48%, while the S&P 500 (INDEX: ^GSPC  ) moved 0.34% lower. The calm morning came as a welcome change for investors, with the European debt crisis frequently causing dramatic one-day swings in the market over the past few weeks. In fact, the average daily price change in the S&P 500 doubled its May total to reach 1% in June, according to data compiled by Bloomberg.

An unexpected decline in manufacturing data seemed to be the predominant factor pushing the Dow lower today. The Institute for Supply Management said its index of national factory activity fell almost four points to 49.7 from 53.5, far below expectations of 52.2 for the month of June. This marks the first time since July 2009 that the index fell below the 50 mark, which indicates an economic contraction. Stocks immediately turned lower following the data's release earlier this morning. While the decline in American manufacturing arrived unforeseen, a larger decline in eurozone manufacturing came as no surprise, as factories in Germany and France show they're suffering from the problems of their southern neighbors.

Dow in focus
DuPont (NYSE: DD  ) plunged almost 3.5% after Jefferies downgraded the chemical producer to hold from buy, and lowered its price target on the company to $55 from $62. With declining demand due to European exposure, analysts see a dim future for the company. DuPont's woes added to an already ailing industrials sector, which trailed other sectors following the poor manufacturing data.

Telecom giant AT&T (NYSE: T  ) accompanied peer Verizon near the top of the Dow, rising 0.80% and 0.6%, respectively. Citigroup raised its price target for AT&T to $39 from $34. AT&T is trading just south of its 52-week high of $36 after a successful first half of the year that included share repurchases and growing its revenue. Verizon continued its success after rising 16% in the second quarter, making it the best-performing company in the Dow for that quarter.

General Electric (NYSE: GE  ) dropped 2.3% after announcing it would sell Business Property Lending to EverBank Financial for $2.51 billion. Business Property Lending provides loans to small and mid-sized companies to finance real estate acquisitions or leases. The move fits with GE's strategy to shrink real estate operations, and should provide a "low double-digit" boost to earnings per share, according to EverBank CEO Robert Clements. EverBank shares are currently up 2.5%.

As we enter the second half of 2012, be sure to stay up to date on the latest news by tracking your favorite companies with the free My Watchlist feature. To get started, click one of the links below:

Charlie Kannel owns shares of AT&T. The Motley Fool owns no shares of the companies mentioned above. 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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  • Report this Comment On July 02, 2012, at 1:30 PM, funfundvierzig wrote:

    It is not only the European malaise impacting DuPont; this struggling chemical conglomerate based in Delaware is also wrestling with...

    * The burgeoning costs in litigation and claims in the aftermath of its counterfeit "innovation" in herbicides. Extraordinarily toxic and harmful Imprelis has killed and damaged hundreds of thousands of mature trees countrywide, and may ultimately cost DD shareholders $1 to $2 billion in our opinion.

    * The embarrassing failure to jettison in auction its cost-slashed and now degraded DuPont car paints business.

    * The continuing failure to develop cutting edge innovative seed traits to compete successfully with Monsanto, the undeniable industry leader.

    * The confidentially hidden costs of settling the $750 million lawsuit brought by INVISTA which found hundreds of safety, fire, and environmental illegalities in the cost-slashed fibre plants purchased from DuPont in 2004.

    Merely the perspective of one individual retail investor with small positions, long and short in DD shares...funfun..

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