Dow Falls for Third Straight Day as Conditions Get Frothier

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) is in its third day of losses so far this morning, as investors are scrambling to make heads or tails of recent commentary from Federal Reserve officials on the future of its stimulus policy. With economic data a scarcity this week, there's little more for investors to use as a gauge for trading purposes. The index is down 85 points as of 11:45 a.m. EDT, with only nine components in the green.

Too small to matter 
The one bit of economic data released this morning was the weekly mortgage applications index from the Mortgage Bankers Association, which reported a 0.2% rise in new application activity for home purchases. But while this is positive news for the housing market, the rise is only one-tenth the size of the prior week's decline. And with mortgage application activity falling in four of the past five weeks, the market will need a much larger boost in order for investors to feel more confident about the trend.

One other factor may also be weighing down the good news: Interest rates also rose last week. Though rates only increased by 3 basis points, investors are sure to take note if application activity slows once again, since higher rates have already led to a summer slowdown for new purchases.

Leading laggards
The big losers this morning in the Dow are Walt Disney  (NYSE: DIS  ) and Bank of America (NYSE: BAC  ) -- both are down more than 2% so far this morning.

Disney reported earnings that beat analyst estimates, but investors aren't celebrating, as the company announced that it expects a $190 million loss in relation to its Lone Ranger flop this summer. Perhaps because of the company's track record with other hit films, the attention given to the Ranger debacle is decidedly overblown, and is sending shares lower than the company really deserves. Disney's next release, Planes, is targeted at the same audiences that loved its Cars films, and with future Marvel films in the works, Disney isn't likely to stay down for long.

Bank of America, on the other hand, is in for the long haul as a new series of lawsuits from the Department of Justice, Securities and Exchange Commission, and New York attorney general's office begin to line up. Citing alleged misrepresentations of jumbo-loan mortgage-backed securities, the DOJ has filed a civil suit against the bank. The complaint cites friction among staff members over the quality of loans that were put into the securitization, leaving a bad taste in investors' mouths as they wonder what else management might have pushed through.

No real winners
This morning the financials are all down in trading, with little momentum. Despite a new agreement between American Express (NYSE: AXP  ) and Wells Fargo (NYSE: WFC  ) that will allow Wells-issued credit cards to be accepted on the AmEx platform, both are in the red. The joining of the two companies in this credit agreement links the nation's top home lender with the nation's top credit card issuer by purchases, and allows for a new relationship to develop and for the companies to take advantage of other opportunities as they arise.

This is a difficult market to interpret, with conditions leaning toward the "frothy" side. And with millions of Americans having already waited on the sidelines since the market meltdown in 2008 and 2009, too scared to invest and put their money at further risk, there's little time to continue waiting if you need to think about the future. Yet those who've stayed out of the market have missed out on huge gains and put their financial futures in jeopardy. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal finance experts show you why investing is so important and what you need to do to get started. Click here to get your copy today -- it's absolutely free.


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