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It's always tough when good news gets followed up by a sinking market. This morning, investors were optimistic about a rise in home prices and strong consumer confidence numbers. But as the day wore on, that enthusiasm gave way to selling, as a speech from Philadelphia Federal Reserve President Charles Plosser that was critical of the QE3 program undermined the steadfast perception of the Fed's interventions earlier this month. In addition, a call from asset management giant BlackRock that the market rally had mostly played itself out weighed on sentiment. By the end of the day, the Dow Jones Industrials (INDEX: ^DJI ) finished down more than 100 points.
Caterpillar (NYSE: CAT ) was the Dow's biggest loser, falling more than 4% after giving a downbeat forecast for its long-term earnings. Cutting its expected range of earnings per share for 2015 by $2 to $3 may seem unusual for investors who are used to thinking quarter-to-quarter, but given how important long-term forecasts are to plotting a company's overall strategic vision, the economic and geopolitical risks that Caterpillar's CEO cited could have far-reaching impacts not just on the company but also on the entire industry. Indeed, rivals Joy Global and Manitowoc (NYSE: MTW ) also plunged on the news, with Manitowoc falling more than 7%.
Hewlett-Packard (NYSE: HPQ ) fell the better part of 3%, hitting another multiyear low. A loss in tax court that stopped HP from making more effective use of the IRS research tax credit was just another piece of bad news for the struggling company, but the real problem that HP faces is trying to drive a coherent strategy to move forward and rediscover a strong direction. So far, investors are skeptical that HP will ever get the job done.
Finally, Alcoa (NYSE: AA ) dropped 2.5%. A report in The Wall Street Journal detailed a fight between Alcoa and former partner Novelis over the U.S. aluminum-can recycling market. Having ended their joint-venture collaboration at the end of last month, Novelis hopes to outdo what it earned from the partnership with Alcoa. Whether that works remains to be seen, but forcing Alcoa to fight amid numerous other problems it faces could put even more pressure on the aluminum giant.
Don't get caught out
Long-term investing is a great way to avoid the mindset of constant daily ups and downs. But you have to know a stock inside and out to be comfortable over the long run. For instance, Caterpillar may see trouble ahead, but it's positioning itself to handle it. Find out how in the Fool's premium report on Caterpillar. With a year's worth of free updates, you'll be on top of the action well into the future. Click here to get started.