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Today's moves in the stock market say a lot about the psychology of investors right now. Read most market commentary, and you'll find two conflicting trends. On one hand, pockets of the economy are starting to look a little better, albeit well below full strength. Yet it seems as if investors would somehow prefer it if the news were really bad, because they'd then think that the Federal Reserve would have no choice but to take additional action to stimulate economic growth. As is, the tepid recovery has thwarted hopes of Fed intervention and, as a result, the Dow Jones Industrials (INDEX: ^DJI ) dropped about 115 points today.
The biggest losers among Dow components all faced bad news today. As I mentioned earlier today, Hewlett-Packard (NYSE: HPQ ) was down sharply, closing off more than 8%, as its earnings report indicated continuing weakness in the PC industry. Boeing fell more than 3%, after losing a big aircraft order.
But, looking down the list, you'll find a host of stocks falling for more general reasons. Alcoa (NYSE: AA ) , for instance, fell almost 3% today, on no apparent news. But worries about potentially reawakening problems in Europe cast doubt on the aluminum giant's prospects to recover, especially given that it needs better pricing conditions in its market in order to get profits moving in the right direction.
Similarly, JPMorgan Chase (NYSE: JPM ) fell more than 1.5% today. It, too, has linked itself with Europe's prospects but, in the long run, what will make more of a difference for investors is how much of the bank's pre-crisis business it can restore. Earnings multiples are very attractive, but if JPMorgan can't grow, due to lower leverage and tighter regulation, the stock may deserve a lower valuation.
Finally, even some defensive stocks did poorly. Coca-Cola (NYSE: KO ) dropped 1.7%, with no particularly obvious explanation for the move. Trading at more than 20 times trailing earnings, Coke looks like it lacks the margin of safety that you'd want from a protective position in your portfolio, so a bit of a pullback makes sense.
Four days in a row
The Dow now has a fairly lengthy losing s treak, but don't waste time worrying about that. The important thing is picking the stocks that will be long-term winners. We've found some great prospects and put them in the Motley Fool's special report on the Dow, where you'll learn about three Dow stocks tailor-made for long-term investors. The report is absolutely free, so just click here and get your copy today.