Politicians Fail, Stocks Plummet

A last-minute effort to drive through an alternative solution to the fiscal cliff by the leaders of the Republican party failed last night, sending stocks sharply lower this morning. As we approach the lunch hour, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is off by 115 points, or 0.86%.

While it's easy to get discouraged on days like today, there are three points that all investors should keep in mind. First, as you can see below, stocks are up considerably this year. Since the beginning of January, the Dow is higher by more than 7%. A triple-digit loss today won't markedly change that.

Second, there's more than just the fiscal cliff weighing on the market today. Here's how Paul Vigna from The Wall Street Journal put it: "Today could be messy. It's the Friday before Christmas, so volume's liable to [be] light, relatively speaking. But it's also a 'quadruple-witching' day, meaning a whole plethora of options expire, so traders will be active either closing or exercising those positions."

And finally, for long-term investors, the failure to reach a compromise on the fiscal cliff last night doesn't fundamentally change the economic horizon, as the president had intimated that he'd veto it anyway.

In terms of individual stocks, Bank of America (NYSE: BAC  ) is leading the Dow lower, followed not far behind by JPMorgan Chase (NYSE: JPM  ) . Both of these stocks have rallied sharply this year on the back of a nascent housing recovery and increased economic optimism. Consequently, it's natural that the deadlock in Washington would at least partially deflate them today.

Also lower today are technology companies. This has been a particularly hard year for many software and hardware makers like Hewlett-Packard (NYSE: HPQ  ) and Intel (NASDAQ: INTC  ) , both of which have suffered from the perceived decline in demand for personal computers. For the year, these stocks are down 42% and 10%, respectively.

Want to learn more about Bank of America?
To learn more about the most-talked-about bank out there, check out our in-depth company report on Bank of America. The report details Bank of America's prospects, including three reasons to buy and three reasons to sell. Just click here to get access.


Read/Post Comments (5) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Add your comment.

DocumentId: 2166161, ~/Articles/ArticleHandler.aspx, 4/17/2014 9:04:11 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement