Why Is the Dow Plunging Again?

The Dow Jones Industrial Average (INDEX: ^DJI  ) is up to its old tricks again. As of 12:40 p.m. EST, the market's premier value index is down about 66 points, or 0.52%. The Dow has lost a nerve-wracking 557 points since the markets closed on Election Day.

What's up with today's continued drop? At a glance, you might want to blame Bank of America (NYSE: BAC  ) , as the bank leads the Dow downward with a 1.8% dive. Rival (and former Dow component) Citigroup (NYSE: C  ) is under shareholder pressure to break itself up into a bundle of smaller operations, which is a terrifying idea to megabanks with a deeply rooted addiction to economies of scale.

But that's actually just a tiny piece of today's Dow puzzle. Bank of America only took a single point off the index's total value. With a single-digit share price, the stock simply doesn't move the price-weighted index's needle very far.

Boeing (NYSE: BA  ) and Home Depot (NYSE: HD  ) hit a bit closer to the mark. The aerospace and defense giant lost 1.8%, or 10 Dow points, in a double-whammy of looming pension-plan changes and newfound cost-awareness in the Department of Defense. Home Depot is simply giving back some of yesterday's huge gains in a typical display of investors getting carried away. The damage? A 2% drop and 10 more Dow points lost. Yep, Boeing and Home Depot play in the same share price league, casting a shadow over Dow values several times larger than Bank of America's.

That's also why Chevron (NYSE: CVX  ) , with shares sitting north of $100 per stub, inflicted the day's largest Dow drop. A mere 1.7% drop slashed 16 points off the Dow. Construction delays and a rising Australian dollar are inflating the costs of Chevron's natural-gas project Down Under, which was priced at a massive $37 billion to begin with.

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  • Report this Comment On November 14, 2012, at 2:45 PM, TENOFWANDS wrote:

    Let us bury Paul Krugman and his culture of the 'economics of scale' while he is still alive. It is only proper: Paul Krugman buried all of us alive with his delusional macro-economic models; we would be remiss if we were to reastrain ourselves.

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