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Why These 3 Dow Stocks Fell Hard This Week

After three straight days of gains based primarily on earnings that largely beat estimates, the Dow Jones Industrial Average (INDEX: ^DJI  ) suffered a triple-digit drop on Friday, leaving the blue-chip index with a gain of just 0.36% for the week. IBM was one of the companies on the Dow that jumped after impressive earnings. The company reported earnings per share of $3.51, beating analyst estimates of $3.43, but investors were perhaps most excited about IBM's raising of its full-year EPS guidance to at least $15.10, up from $15 previously.

But as has often been the case lately, Europe stepped in to help ruin the Dow's party at the end of the week. More specifically, Spain played the role of official party-pooper, with the country's benchmark 10-year bond yields rising above 7%, a level that's unsustainable. The country's Valencia region announced that it will ask the Spanish government for help refinancing its debt, and Spain lowered its 2013 full-year GDP estimate, saying it expects GDP to contract in 2013 by 0.5%.

But while the Dow managed to eke out a meager gain despite a rough Friday, there were individual stocks that didn't fare nearly as well.


Percent Change This Week

Bank of America (NYSE: BAC  ) (9.59%)
JPMorgan Chase (NYSE: JPM  ) (6.02%)
American Express (NYSE: AXP  ) (3.66%)

Financials had a very rough week. Bank of America dropped nearly 5% on Wednesday alone after announcing earnings. Despite posting a profit that beat expectations, investors were worried about the quality of the bank's earnings as well as continuing headwinds in the form of low interest rates and stronger regulations.

JPMorgan Chase continues to deal with the fallout of its disastrous "London Whale" trade, and the company was hit this week with a lawsuit from a former brokerage client alleging that the bank pushed investors to its own overpriced and underperforming funds. Other reasons investors ran from these big banks this week included fears that the LIBOR scandal could spread to this side of the pond, as well as continued bad news from Spain and the eurozone, the main factor keeping the global economy unstable and unpredictable.

American Express' didn't drop nearly as much as the other two big Dow losers, but investors still punished the stock after its earnings report showed that customer credit card spending increased 7%, slower than it has in the past few quarters. Even so, the company managed to beat analyst expectations, posting earnings of $1.15 per share versus analyst consensus of $1.09.  

The fact that Bank of America managed to solidly beat earnings expectations yet fell more than 9% this week highlights how complicated and difficult to understand these large financial institutions can be. If you're a current or potential Bank of America investor, you must understand the myriad of factors that drive this stock. Our senior banking analyst has compiled a premium research report that sheds light on the company's so-called "black box" balance sheet and concludes by answering the all-important question: Should you buy, sell, or hold Bank of America? Access the premium report today.

Brendan Byrnes owns no shares of any company mentioned in this article. The Motley Fool owns shares of Bank of America and JPMorgan Chase and has created a bear call spread position in American Express. Motley Fool newsletter services have recommended creating a write covered strangle position in American Express. 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. The Motley Fool has a disclosure policy.

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Related Tickers

10/21/2016 4:47 PM
^DJI $18145.71 Down -16.64 -0.09%
AXP $67.36 Up +0.58 +0.87%
American Express CAPS Rating: ****
BAC $16.67 Up +0.11 +0.66%
Bank of America CAPS Rating: ****
JPM $68.49 Up +0.23 +0.34%
JPMorgan Chase CAPS Rating: ****