What's Behind the Dow's 3-Day Losing Streak

Macro concerns continued to plague markets this morning, as the Dow Jones Industrial Average (INDEX: ^DJI  ) lost ground for a third straight day. Today, the bad news came from Germany and France; both released data indicating their manufacturing and services sectors shrank more than expected in July. The announcements came just after Moody's downgraded its outlook for Germany, along with the Netherlands and Luxembourg, to negative.  As Dan Veru, chief investment officer at Palisade Capital Management, succinctly stated, "It's far from over." At 12:30 p.m. EDT, the Dow had dropped 1.25% while the S&P 500 (INDEX: ^GSPC  ) fell 1.3%.

Earnings season has been the other leading economic storyline, at times buoying markets against global macroeconomic pessimism. This would not be the case today, however. Dow components AT&T (NYSE: T  ) and DuPont reported earnings. AT&T announced that profits beat expectations by $0.66, but the company's Q2 revenue of $31.6 billion missed expectations. Wireless strength carried the mobile operator as margins improved, although the company will likely see margins shrink from due to subsidizing Apple's upcoming iPhone 5. Even though AT&T maintained its status as the leading service provider for iPhones, shares sank 2.7%. Chemical producer DuPont reported uninspiring quarterly results, and cut its full-year forecasts, resulting in a 2% decline. After markets close, all eyes will turn to Apple and Netflix for their earnings reports.

No Dow stock suffered as much as Cisco (Nasdaq: CSCO  ) today, which plummeted almost 6%. Cisco investors have taken a beating lately; shares have fallen 8.5% over the last four days. The company announced plans to cut 2% of its workforce, or 1,300 jobs, citing global economic concerns and slow corporate spending. This builds on a negative trend started last year, when Cisco terminated 6,500 employees. Adding to the pain, analysts warn that VMware's $1.26 billion acquisition of Nicira could pose a threat to Cisco's networking dominance.

Caterpillar (NYSE: CAT  ) had gained over 1% this morning, as investors are hopeful in advance of Caterpillar's earnings announcement tomorrow. Positive Chinese manufacturing news may have motivated the surge, as HSBC said its Chinese manufacturing index rose to its highest level since February. Shares are trading approximately 30% off the industrial company's 52-week highs around $115 in February. By 12:30 p.m., shares had lost their gains and traded at a slight loss.

As the European economy unravels and American growth stagnates, many investors are looking to emerging markets to boost their portfolio. In The Motley Fool's latest special report, we identify three companies poised to profit from growth in emerging markets. To learn more, claim your copy of "3 American Companies Set to Dominate the World." It's yours -- for free! -- so get your copy today.

Fool intern Charlie Kannel owns shares of AT&T, but no other companies mentioned above. The Motley Fool owns shares of Apple, Netflix, and Cisco Systems. Motley Fool newsletter services have recommended buying shares of Apple, VMware, and Netflix. Motley Fool newsletter services have also recommended creating a bull call spread position in Apple. 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.


Read/Post Comments (0) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 1955362, ~/Articles/ArticleHandler.aspx, 7/25/2014 6:08:00 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement