The Stocks Pulling the Dow Lower

A slew of downgrades and one large settlment check are pulling the Dow Jones Industrial Average (INDEX: ^DJI  ) average down this afternoon. As of 12:30 p.m. EDT, the index sits at 13437, down 48.54 points, or 0.36%. The S&P 500 is down by 0.39%, while the Nasdaq moves into the red by 0.37%. Dow components Caterpillar (NYSE: CAT  ) , McDonald's (NYSE: MCD  ) , and United Technologies (NYSE: UTX  ) were downgraded, while Bank of America (NYSE: BAC  ) agreed to settle a lawsuit.

So what's the damage?
Caterpillar was downgraded from buy to neutral by Bank of America Merrill Lynch analyst's. The equipment manufacturer is trading lower by 1.38% for the day. The company spent most of the year up but just recently slipped into the red, down 5.17% year to date.

McDonald's was lowered by Janney Capital from buy to neutral. The burger joint is down by 2.08% today. Janney Capital said lower same-store sales comps in September are on pace to make it the worst month of the year. With sales slipping and food prices high due to the summer drought, the downgrade puts a fresh light on the troubles facing the U.S. economy as a whole.

United Technologies, a stock that is trading lower by 0.6%, also suffered a downgrade. This comes just a few days after the company announced worries over global growth. Oppenheimer lowered its rating from "outperform" to "perform," citing economic headwinds and a lack of catalysts.

Finally, Bank of America is trading lower by 1.17% after the company agreed to pay $2.43 billion to settle a lawsuit. The class-action suit is related to the Merrill Lynch acquisition in 2008. Shareholders brought the suit against the company claiming that B of A officers made false or misleading statements about the financial health of both companies. The settlement is expected to lower B of A's third-quarter earnings by about $0.28 per share.

Foolish thinking
An important thing to remember when looking at analyst downgrades or upgrades is that it's simply someone's opinion. They could be wrong, they could have a shorter time horizon than you, and they could possibly be looking at different business factors. Take this kind of advice with a grain of salt. Before making any trades based on another's opinion, make sure you understand what went into making their decision.

Although the uncertainty of this lawsuit is now behind Bank of America, the company still faces a number of risks and possible opportunities down the road. To find out what they are, simply click here.

Matt Thalmanowns shares of bank of America. The Motley Fool owns shares of Bank of America and McDonald's. Motley Fool newsletter services recommend McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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