Why the Dow Dropped Today

What a difference a day can make. Coming on the heels of one of its stronger performances this year, U.S. stock markets ended in the red today. At days end, the Dow Jones Industrial Average (INDEX: ^DJI  ) found itself trading 0.02% lower. Probably unsurprisingly, both the Nasdaq and S&P 500 slumped downward 0.41% and 0.05%, respectively as well. The market's so-called "fear gauge," or the VIX (INDEX: ^VIX  ) , spiked sharply today, rising 7.96%. Markets temporarily paused from their intent focus on potential stimulus, although some weak economic data did surface during the day. Survey data from the Dallas Federal Reserve plummeted sharply in July, reaching a 10-month low and indicating a weakening manufacturing environment in the wider Texas region.

Around the markets
A 2% drop in JPMorgan Chase (NYSE: JPM  ) , which registered the largest drop in the index today, dragged the Dow into the red, on the back of a downgrade from banking counterpart Deutsche Bank. This erased gains stemming from positive news from the likes of Coca-Cola (NYSE: KO  ) and AT&T. Coke announced today a reorganization of its business around three core units: Coca-Cola Americas, Coca-Cola International, and its bottling division. AT&T announced an extension of its current buyback program that would allow it to purchase back nearly 5% of its shares outstanding.

In other news, shares of Latin America e-commerce site MercadoLibre (Nasdaq: MELI  ) cratered 7.54% today on no news. The company, with significant exposure to potentially slowing economies like Brazil, finds itself down nearly 14.5% since the beginning of the year. Touted as the eBay of Latin America, the company has an already-proven business model, and despite its pricy valuation of nearly 37 times earnings, its predicted annual growth rate of 28.15% over the next five years makes for a pretty compelling bull thesis.

With all the noise surrounding the market and your investments, we Fools still maintain that finding stocks that have strong economics and holding them for the long-term. Our analysts recently highlighted the three of the Dow's most promising dividend payers in a free research report, which you can access today.

Andrew Tonner held no financial position in any of the companies mentioned in this article. You can find Andrew and all his Foolish writing on Twitter at @Andrew Tonner. The Motley Fool owns shares of JPMorgan Chase, MercadoLibre, and Coca-Cola. Motley Fool newsletter services have recommended buying shares of Coca-Cola, eBay, and MercadoLibre. 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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  • Report this Comment On July 30, 2012, at 8:03 PM, edgarc wrote:

    The headline says "Why the Dow Dropped Today" but the story underneath it does NOT tell "why the Dow dropped today." You must deliver on your tease or you earn a bad reputation, like Gloria Hotcha in Junior High. (The reason the Dow dropped today--2 one-hundredths of a point--was quite simply noise without cause.)

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