Markets Continue Their Fall From All-Time Highs

Uncertainty regarding monetary policies in the U.S. and abroad are wreaking havoc on the markets today. As of 12:45 p.m. EDT the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is down 199 points, or 1.35%, while the S&P 500 (FTSEINDICES: ^FTSE  ) has lost 1.67% and the Nasdaq has declined 1.53%. The continued fear that the Federal Reserve will take its foot off the stimulus gas pedal too early, combined with the Chinese government's tightening of the country's credit, has many investors believing that a worldwide recession may be coming down the road. The European nations are still struggling, emerging markets have been crushed by low commodity prices, and now the U.S. and China -- the two nations that have been driving the global economy -- are dealing with problems that show cracks in each country's foundation.

Investors should realize that things may get worse before they get better, but the best thing to do is hold on and ride out the storm. This is not the time to panic and sell.

A few Dow losers
Shares of Pfizer (NYSE: PFE  ) are down 3.9% after the U.S. Supreme Court refused to protect the company from lawsuits regarding a subsidiary it purchased back in 1968 called Quigley. The unit produced asbestos-containing products that were used in the steel industry from 1940 to 1970, but in 1992 Quigley filed for bankruptcy and stopped most of its operations. A federal court recently ruled that the claims of asbestos-related issues can proceed against Pfizer, even though the pharma giant says it played no role in the making of the Quigley products and should be protected from further suits by the bankruptcy. 

Meanwhile, shares of PC manufacturer Hewlett-Packard (NYSE: HPQ  ) and chip maker Intel (NASDAQ: INTC  ) are down 4.3% and 2.3%, respectively, for a number of reasons. The first, as my colleague Dan Caplinger noted this morning, is that HP was crushing the market so far in 2013, so as we move into a correctional period, HP will naturally take a bigger hit than some of its fellow Dow components. But even with today's drop, the stock it still up more than 60% in 2013, while the Dow is only up 11.35%.

The other reason I believe Intel and HP are slipping is the potential effect of China's new monetary policies on overall economic growth and personal consumption. Chinese consumers are a massive market for electronics, but if we see higher interest rates and tighter monetary policies for an extended period of time in China, the country may begin to suffer higher unemployment and lower wages for the middle class, which would likely result in lower consumer spending. The PC industry is already struggling, and a further sales hit caused by China would likely put both companies in a difficult position.


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