The Dow and Financials Take a Tumble on European Fears

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) reached a new record high yesterday after rocketing up 111 points. But the gains were short-lived as investor fears regarding the continued financial struggles in Europe started taking their toll on the index. Protests have begun in Cypress, where the country waits for its banks to reopen tomorrow with the newly minted capital restrictions. Italy is also in a pickle as yet another round of failed negotiations leave the country without a functioning government. And British banks may find themselves scrambling to gather up more capital in order to meet their loan obligations.

And while the Dow was helped yesterday by our own positive economic news, it's having no such luck this morning. Pending home sales fell 0.4% in February, and while this still leaves sales of existing homes at the highest level since April 2010, the drop exceeded the 0.3% fall analysts expected. This news has hit the Dow, and financials are also taking a beating this morning.

JPMorgan (NYSE: JPM  ) is leading the index losers this morning with a 1.79% drop. The bank has had a series of misfortunes lately, leading investors to start reconsidering the strength of the one bank that they considered unstoppable. With the news that JPM may have withheld the true losses sustained by the London Whale fiasco from regulators and shareholders, beloved CEO Jamie Dimon is being questioned more than ever. And the Fed's stress tests found weaknesses in the bank's capital plans, leaving investors to wonder if there's a chink in JPMorgan's armor. And now that economic data has given some mixed signals, new mortgages coming into the second largest originator from 2012 may be slowing -- reducing JPM's chances of continued record profits.

Bank of America (NYSE: BAC  ) was also leading the Dow lower this morning, though not as heartily as JPMorgan. Down 0.69% this morning, B of A continues to slide as it lost 1% yesterday, even as the Dow climbed to a new all-time high. The bank has been dealing with a new crop of issues that continue to spring up, even when investors thought the worst might be over. A new lawsuit from Freddie Mac named BAC, JPM, and Citigroup (NYSE: C  ) among 15 international banks that participated in rigging the LIBOR interest rate. Foreclosures are rising again, and with the long, drawn-out processes, Bank of America will continue to suffer since it has the biggest pile of loans to deal with -- thanks to Countrywide. And all of this negative news has really hit the bank that was making solid progress on improving its image, eliminating share dilution, and improving shareholder value.

Lastly from the Dow, American Express (NYSE: AXP  ) is fighting to stay at breakeven today after some big gains yesterday. The personal finance company is hoping to keep some of the spoils from yesterday's big win following the announcement that its joint venture with Wal-Mart, Bluebird, was improving its stats with new FDIC insurance and governmental payment direct deposits. Though the stock was down earlier in trading, it's made its way back up to yesterday's close and may continue to hold there.

Bank of America's stock doubled in 2012. Is there more yet to come? With significant challenges still ahead, it's critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool's premium research report on B of A, analysts Anand Chokkavelu, CFA, and Matt Koppenheffer, Financials bureau chief, lift the veil on the bank's operations, including detailing three reasons to buy and three reasons to sell. Click here now to claim your copy.


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