Why the Dow Cratered Today

The Dow Jones Industrial Index (INDEX: ^DJI  ) took a serious turn for the worse today, falling 205 points, or 1.52%, to close at 13,343. The market was hampered by disappointing news from a number of major companies, as well as renewed anxiety about Spain's fiscal situation.

McDonald's (NYSE: MCD  ) led the Dow downwards, taking a 4.5% hit after missing earnings estimates for a second straight quarter. Earnings per share fell 1.4%, and global sales were also down. The company, which has a massive presence overseas, was hurt by a stronger U.S. dollar, and increasing competition.

General Electric (NYSE: GE  ) was the second biggest loser in the index, as its third quarter also failed to impress investors, and currency headwinds, as with McDonald's, hurt results badly. Shares fell 3.4%. Microsoft (Nasdaq: MSFT  ) also shed more than 3%, as sales for the Windows operating system, its cash cow, slipped.

Outside of the Dow, Advanced Micro Devices (NYSE: AMD  ) , the second largest maker of PC processors, fell almost 17%, after a disastrous quarter of sales, a massive inventory write-off, and announced layoffs, rumored to take place in the engineering department.

On a macro level, the global markets didn't like the tone of European leaders after a key meeting today, which revolved around the establishment of a new supervisory banking body. Speculation that the talks have lost their urgency was fueled by a lack of specific details given by the leaders afterwards.

About the only consoling fact of the day was that the markets didn't fall 23% in a matter of hours, like they did 25 years ago, on what is now referred to as Black Monday. The worst single day of trading in market history, nobody has ever quite figured out why October 19, 1987 was so historically bearish. At least, today, investors know what went wrong.

Only one of the Dow's 30 components, Home Depot (NYSE: HD  ) , eked out a gain for the day. The home improvement company traded up 0.15% on news of increasing home sales.

For GE, the recent financial crisis struck a blow, but management took advantage of the market's dip to make strategic bets in energy. If you're a GE investor, you need to understand how these bets could drive this company to become the world's infrastructure leader. At the same time, you need to be aware of the threats to GE's portfolio. To help, we're offering comprehensive coverage for investors in a premium report on General Electric, in which our industrials analyst breaks down GE's multiple businesses. You'll find reasons to buy or sell GE, and you'll receive continuing updates as major events unfold during the year. To get started, click here now.

John Divinehas no positions in the stocks mentioned above. You can follow him on Twitter @divinebizkid and on Motley Fool CAPS @TMFDivine.

The Motley Fool owns shares of General Electric Company, McDonald's, and Microsoft. Motley Fool newsletter services recommend The Home Depot, McDonald's, and Microsoft. 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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