The Dow Jones Industrial Average (INDEX: ^DJI ) had a rough day today, dropping more than 100 points late today partly on comments from Federal Reserve Bank of Philadelphia President Charles Plosser, who said that research shows that additional bond purchases by the Fed are "unlikely to reduce long-term interest rates by a significant amount," and that "we are unlikely to see much benefit to growth or employment from further asset purchases."
Plosser's comments were enough to drop the Dow big after solid September consumer confidence numbers actually pushed the Dow into positive territory all the way into early afternoon trading.
Let's check the damage and see how all three major U.S. indices fared on the day:
|Dow Jones Industrial Average||-101.37 [-0.75%]||13,457.55|
|Nasdaq (INDEX: ^IXIC )||-43.06 [-1.36%]||3,117.73|
|S&P 500 (INDEX: ^GSPC )||-15.30 [-1.05%]||1,441.59|
Looking at individual stocks, Caterpillar (NYSE: CAT ) had by far the worst day of the 30 blue chips on the Dow, dropping 4.25%. The heavy-equipment manufacturer cut its 2015 EPS forecast from a range of $15-$20 down to $12-$18. The company blamed the decrease on lower anticipated commodity prices, which would reduce the demand for its equipment over the next few years. The lower guidance is especially troubling, considering the company's huge bet on mining last year with the acquisition of Bucyrus, Cat's largest acquisition ever. But that doesn't necessarily mean the acquisition was a bad idea. Caterpillar's resources industries segment (which includes mining) has by far the highest margins of any segment and has shown high growth with the integration of Bucyrus.
Outside the Dow, Tesla (Nasdaq: TSLA ) had an even worse day today, dropping 9.8% after announcing that it lowered its revenue forecast for the full year. The company has fallen behind on production of its critical Model S sedan, saying that production is "slower than we had earlier anticipated." Tesla also announced that it will sell 4.34 million shares of common stock, though it also said that CEO Elon Musk will buy up to $1 million of the shares. Ultimately, Tesla remains a speculative stock that is reliant on the electric vehicle becoming much less of a niche item than it is today.
While Caterpillar had a rough day today, the stock's drop could be an opportunity to buy shares of a fantastic business at a bargain price. Caterpillar's quality products, extensive service network, and unparalleled brand strength combine to give it solid competitive advantages. But does that make it a buy now according to our analysts, or are there other risks that investors need to know about? Read all about whether it's the right time to buy Caterpillar stock in our brand-new report. Just click here to access it now.