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Why the Dow Dropped Today

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The stock market has officially become boring.

In the absence of a major story line threatening impending doom, U.S. indexes have turned away from their volatile ways. It seems, at least for now, that the regular 1% surges investors grew so accustomed to have fallen by the wayside. That’s great for investors who can use this downtime to shift their focus to what we love most dearly at the Fool -- stock picking. 

And while I’ll get to a few opportunities in a moment, let’s not forget that the market was actually open today

On this very boring day, the Dow Jones Industrial Average (INDEX: ^DJI  ) shed a meager 17 points, leaving it only 0.1% lower. This leaves the Dow essentially flat on the week, and up a surprising 2.9% so far in September. In equally unexciting fashion, the S&P 500 shed 0.01%, and Nasdaq rose 0.1%.  Investors’ anxiety has fallen off a cliff so far this month. Today, the VIX (INDEX: ^VXX  ) lost another 0.6%, adding to its almost 25% decline this month.

Talking Stocks
Hitting the highlights on some of today’s biggest moving stocks, we see some pretty massive moves from several noteworthy names.

Shares of biotech VIVUS (Nasdaq: VVUS  ) got an 11% haircut today, as the European Medicines Agency, or EMA, received some initial negative feedback from the regulator authority regarding its weight loss drug, Qsiva (branded in the U.S. as Qsymia).  This, of course, preempts an actual rejection, but it certainly bodes poorly for VIVUS. VIVUS competes in the red-hot weight loss drug space with Arena Pharmaceuticals (Nasdaq: ARNA  ) and Orexigen Therapeutics.  Arena, whose Belviq drug has already gained approval from the U.S. FDA, rose 3% on the news of a potential red flag for its competitor.

On the upside, shares of KB Home spiked 16.4%, turning profitable in its third-quarter earnings. The stock’s been on a tear this year, rising a staggering 127% after today’s surge, and further supporting the notion that the U.S. housing market is indeed recovering.  This is just one reason why I added shares of the iShares Dow Jones U.S. Home Construction Index Fund to the real money portfolio I manage for It was lifted 1.9% by the positive report, as well.

Today’s last big winner was designer and last year’s IPO studmuffin Michael Kors (Nasdaq: KORS  ) , which also shot 9.3% higher.  The company recently raised its earnings-per-share guidance. The stock, although constantly expensive, is up a staggering 137% since its public debut and, probably unsurprisingly, still looks expensive. Apparently, growth doesn’t come cheap for this designer.

However, chasing hot stocks is a recipe to get burned. Saving is a long-term process, not an overnight miracle, and we believe that looking past news events and market cycles is often the best way to win for the average guy. We highlight three safe, stable large-cap companies that should thrive over time in a new research report from the Fool.  You can access it free of charge today by just clicking here.

Fool Andrew Tonner owns shares of the iShares Dow Jones U.S.Home Index Fund. Follow me and all my Foolish writing on Twitter at @Andrew Tonner.

The Motley Fool owns shares of iShares Dow Jones US Home. The Motley Fool has a disclosure policy.
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Read/Post Comments (2) | Recommend This Article (11)

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.

  • Report this Comment On September 21, 2012, at 11:55 PM, Foreeverlong wrote:

    To comment briefly on the Vivus PPS reduction; Arena longs have predicted the EMA's rejection of Vivus's Qsymia for months. So called "areniacs" have also said that Qsymia will not be trusted by U.S. physicians. Certainly the proof will be in the sales of each drug, but I am amazed by the amount of misinformation that has been promulgated by parties that should know better. At the risk of being accused of beating a dead horse, the facts have been layed out for all to see, Belviq will not have a competitor in Europe, and for that matter in the U.S.

  • Report this Comment On September 22, 2012, at 12:31 AM, thogshead wrote:

    About "Today, the VIX (INDEX: ^VXX ) lost another 0.6%, adding to its almost 25% decline this month," if anyone is interested knowing how and when VIX volatility will change, Volatility Research has come up with a pretty good way to predict VIX “fear guage” volatility using NYSE VXX:

    The klinker in this rally-woodpile is VIX volatility, and this rally may be a house-of-cards.

    We’re in the lull before the Perfect Storm.

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VIVUS CAPS Rating: **