Why the Dow's Slumping Again

Well, it wasn't exactly yesterday's bloodbath, but the Dow Jones Industrial Average (INDEX: ^DJI  ) still shed nearly 1%, or 121 points, today. Despite the sell-off, the blue chips still fared better than the S&P 500 and Nasdaq, which lost 1.2% and 1.4%, respectively. Oil prices, on the other hand, seem to have found a bottom, managing a slight recovery after falling 4.7% yesterday. The trading session started off promisingly enough in positive territory with better-than-expected numbers in unemployment claims and exports, but the rise was brief.

The recipe for today's drop seemed to be the same as yesterday's -- more worries about solvency in Europe, and the fiscal cliff at home. Across the Atlantic, markets shrugged off a narrow vote in the Greek Parliament for more austerity, which helps pave the way for $40 billion more in bailout funds. The key factor was that the European Central Bank said it's likely to delay a decision on the emergency funding until late November. Spain also passed up on a chance to request aid from the bailout fund.

As for the fiscal cliff, the S&P warned that the U.S. credit rating would be affected if lawmakers don't figure out a solution before the end of the year. The news comes a day after Fitch threated to lower its credit rating, and the S&P also said there was a 15% that the country would go over the cliff.

Turning to individual stocks, Cisco (Nasdaq: CSCO  ) led the losers, falling 2.2%, on no company-specific news. The networking specialist is an economically sensitive tech bellwether, and the concerns at home and in Europe have investors worried about its growth, as shares have been sliding in recent weeks. Cisco reports earnings next Tuesday; analysts are projecting earnings of $0.46 a share.

McDonald's (NYSE: MCD  ) also took a 2% hit after it surprised the market with a drop in monthly sales. The Golden Arches said same-store sales fell 1.8% in October, the first time it's reported a decline in comps since March 2003. Business was poor in all regions, as CEO Don Thompson blamed "pervasive challenges in the global marketplace" for the decline.

Bank of America (NYSE: BAC  ) was one of the few Dow gainers, bouncing back 1.7% after yesterday's 7.1% loss. No major news was behind the jump; the market likely thought it was oversold after yesterday's sharp drop. Boeing (NYSE: BA  ) shares were also up 1.2%, after it signed a deal to sell 200 737s to a Kuwaiti company called ALAFCO. The order should bring in around $2 billion for the aircraft maker.

Finally, in after-hours news outside the Dow, online travel-service priceline.com agreed to purchase industry rival Kayak Software for $1.8 billion, valuing the target at $40 a share. Kayak shares jumped 26.6% to $39.30 in after-hours trading, while Priceline shares were off 1.9%.

Today's deal marks Boeing's second such sale in just a few days, and the aerospace giant also announced plans to look into building a larger 787 plane. Find out what else is in store for the industrial heavyweight in our new premium ticker report, which covers all the key components of the company's business, as well as opportunities and threats you need to be aware of. To get your copy of this valuable insight now, all you have to do is click right here.


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  • Report this Comment On November 08, 2012, at 10:26 PM, CMFish wrote:

    Hilarious, we just had and election. You think the outcome had anything to do with the Dow slumping?

    Naa, look over there, squirrel!!

  • Report this Comment On November 08, 2012, at 10:53 PM, MissusB wrote:

    Every financial editorial is blaming the drop in the stock market to investors worrying about European markets and the looming fiscal cliff here in the US. There are MANY investors like myself that sold off after the re-election of the president because the electorate just guaranteed four more years of uninformed and dangerous fiscal policies!

  • Report this Comment On November 09, 2012, at 4:49 AM, Hestheone wrote:

    The smart money left a week or two prior to the election as the writing was on the wall. Now even dumb money realizes that with Boeing and Lockheed laying off tens of thousands or workers, revelation that the employment numbers are bunk, and the ongoing handouts from the never ending QE3 providing no traction the market is a poor choice.

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