China's Cash Crunch Drags Down the Dow

Wall Street has let out a collective groan as the Dow Jones Industrial Average (DJINDICES: ^DJI  ) kicks off the week deep in the red on the heels of last week's rollercoaster ride. The index has fallen more than 60 points as of 2:20 p.m. EDT, having rebounded significantly from a 200-point plunge earlier in the day. Concerns over China's cash crunch and slowing economy are pulling stocks down today, and all but a few of the Dow's members are in the red. China's fears shouldn't concern every investor, but for shareholders of a few Dow stocks, the second-leading economy's slowdown could hurt.

Industrials in danger
Shareholders of two of today's big losers need to keep an eye on China's downturn. Alcoa (NYSE: AA  ) shares have fallen about 2.6% today, and this aluminum producer's near-future prospects look grim. The aluminum industry is already suffering from a massive oversupply and tepid demand, thanks in part due to Chinese overproduction in recent years. Alcoa has made inroads into other areas, diversifying into finished aluminum goods and pairing up with Boeing (NYSE: BA  ) on an aluminum recycling plan, but weakening Chinese demand can hardly be mitigated by such initiatives. Until the industry turns around -- which will depend on accelerating economic growth in a few key regions -- Alcoa will stand on shaky footing.

Caterpillar (NYSE: CAT  ) shares are down about 1.4% today, and like Alcoa, this is one stock that will take a hit from economic problems across the Pacific. Growing infrastructure construction once made Caterpillar's future in China look rosy, but with China's economic slowing and the country's credit crunch making lending a costly proposition, manufacturing has taken a blow. Caterpillar's not in so bad a position as Alcoa due to its retention of the top space in such a cyclical industry, but China's rash of problems will exacerbate the manufacturing sector's sluggishness and lengthen the time it takes for Caterpillar and its rivals to bounce back.

Elsewhere in the Dow today, Boeing's shares have fallen 1.6% after one of the company's 787 Dreamliner aircraft was forced to land in Houston due to a mechanical problem -- the third forced landing of a Dreamliner in the past week. While investors are fretting over the issue, it's not an indictment of the craft in the long term. Following the 787's grounding earlier this year, all eyes are watching carefully for another slip-up. More importantly, Dreamliner sales haven't been affected, and to Boeing and its shareholders, that's a true indication of the new aircraft's future.

Microsoft (NASDAQ: MSFT  ) is defying the Dow's decline today, leading a few blue-chip gainers by rising 2.5%. The company is dealing with the aftermath of changing course on its next-generation Xbox One gaming console, nixing its previous always-online requirement and used-game policies following a furious backlash from consumers. With competitor Sony (NYSE: SNE  ) quick to point out the consumer-friendly features of its own PlayStation 4 next-gen device, Microsoft was forced into the switch-up in order to preserve sales. With the furor dying down, however, the fight for next-generation gaming hardware leadership should be one for the ages.


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