Why the Dow Plunged 170 Points Today

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 likelihood of an American military intervention in Syria continued to rise today amid the piercing rhetoric from Washington's top brass. Secretary of Defense Chuck Hagel said that the U.S. is "ready to go" if a strike on Syria is called for. The sentiment caused Wall Street to promptly sell off on the fear of war, and the Dow Jones Industrial Average (DJINDICES: ^DJI  ) cratered 170 points, or 1.1%, ending at 14,776. 

Coca-Cola (NYSE: KO  ) added 0.1%, an insubstantial gain that was nonetheless enough to qualify Coke's stock as the top Dow performer. Coca-Cola FEMSA S.A.B. de C.V., a Mexican franchise bottler partially owned by the U.S.-based Coke, just acquired its Brazilian counterpart, Companhia Fluminense de Refrigerantes, for about $450 million, giving FEMSA -- and therefore Coca-Cola proper -- a firm presence in the South American emerging market.

Verizon Communications (NYSE: VZ  ) barely broke even, ending fractionally higher on a day where only two Dow stocks avoided losses. Verizon's 4.4% dividend yield is the second highest in the entire index, a quality that didn't hurt Tuesday as bond yields fell. With interest rates ticking modestly lower in the face of mounting Middle Eastern tensions, income investors, intelligently, start looking to investments like Verizon that offer both a solid yield and equity in the underlying company. 

Meanwhile, Microsoft's (NASDAQ: MSFT  ) stock finished near the bottom of the blue chips for a second straight day, losing 2.6% as shares continue to slide following the market's jubilant reaction to the news of CEO Steve Ballmer's impending exit on Friday. Though the software giant's Xbox One console could give the stock a boost after its holiday release, one analyst today said shares couldn't sustain a rally until the company really starts innovating in a post-PC world.

Lastly, Bank of America's (NYSE: BAC  ) stock shed 2.6% as a lawsuit filed by the U.S. Department of Justice against the bank was sent to trial by a U.S. district judge. The suit claims that the Charlotte-based bank, as a result of its Countrywide acquisition, is liable for more than $1 billion in losses incurred by American taxpayers after the government took control of Fannie Mae and Freddie Mac in 2008. 

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Comments from our Foolish Readers

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  • Report this Comment On August 27, 2013, at 6:19 PM, mikecart1 wrote:

    The reason for the sell off for this issue or any past war is the simple idea that if it affects gas, it affects all. Everything you buy is affected by transportation. Transportation is affected by fuel costs. If fuel costs go up because it is harder to get oil delivered in battle areas, then companies not related to transportation or fuel directly will have to take a hit in transportation fees. Is McDonald's going to raise the price of a Big Mac just because their food supplier that used a truck to travel from the food mill that traveled from the farm that had to spend more fuel to raise the cows and fields who also had to take a hit from the fuel costs related to the transportation of fertilizer and farming products because the fertilizer company had to spend more for fuel from a country halfway around the world?

    No. :)

  • Report this Comment On August 27, 2013, at 7:06 PM, feudi wrote:

    tomorrow is gonna be very ugly.

  • Report this Comment On August 27, 2013, at 7:12 PM, TENOFWANDS wrote:

    The biggest fear in the Global economy is not Syria, Egypt, Iran, or war in general; it is, in fact, the fear that there will be a collective realization of the methodological and structural flaws in our economic system. The consolidation of wealth in the hands of an increasingly SMALL and INVISIBLE elite is the evidence of this, and it will continue unabated until it is recognized widely and openly.

  • Report this Comment On August 28, 2013, at 7:21 AM, neocolonialist wrote:

    This market is so over-sold and investors so edgy, I am worried that this is the beginning of a broader selloff. But I think not yet. Timing the market is always a risky proposition at best.

    I am curious whether this really has anything to do with Syria, and more to do with the horrible jobs, manufacturing and housing data that has come out this week. Or maybe its all of it.

    A correction, probably large, is coming, the question now is, is this it?

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