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 stock market's record high earlier this week is starting to seem like a distant memory. Just two days after the Dow Jones Industrial Average (^DJI 0.34%) soared to an all-time intraday high over 15,700 on the Fed's surprise "no taper" announcement, the blue chips were reeling from yet another self-inflicted government crisis. The Dow slid throughout the day today to finish down 185 points, or 1.2%, closing at 15,451.
Fed Chairman Ben Bernanke has repeatedly cited incompetent fiscal policy as a major reason for the economy's struggles, and stocks have gotten crushed several times in recent years due to government stalemates, most notably when Standard & Poor's cut the U.S. credit rating over the debt ceiling standoff two years ago.
Today, America's favorite legislative body was at it again as the Republican-led House passed a resolution to shut down the government if Obamacare is not defunded. The Democrat-led Senate has promised to strip the Obamacare provision, but if Congress cannot agree on a short-term spending bill by Oct. 1, the start of the fiscal year, the government will shut down. If there's one thing the market hates, it's uncertainty, and a government shutdown would be in no one's interest. Even if Congress reaches an agreement, the development symbolizes the legislators' detachment from the country's urgent problems, choosing, instead, to occupy itself with self-indulgent, quixotic posturing.
Elsewhere, investors seemed to be spooked by comments from St. Louis Fed President James Bullard, who said the central bank may begin the taper at its October meeting if employment indicators show improvement. After nearly everyone in Wall Street guessed wrong about the September meeting, it seems inane to hang on the every word of the regional Fed presidents again. Short-term traders, however, are looking for any clue into the market's immediate direction, and they are the ones who dominate day-to-day trading, as my colleague Morgan Housel explains here.
On the Dow today, Caterpillar (CAT 1.58%) led the blue chips' decline as the heavy-equipment maker reported yet another sales decline. Caterpillar said this morning that worldwide sales of its machinery fell 10% in the three months ending August, while power systems sales dropped 6%. Both numbers were worse than in its previous three-month period ended July 31. Caterpillar has been one of the Dow's worst performers this year as a cutback in mining production, and weakness in China, have squeezed some of its major revenue streams.
Microsoft (MSFT -0.18%) shares didn't fare much better as the market seemed uninspired by its investor day conference yesterday, outgoing CEO Steve Ballmer's last. The meeting seemed devoid of any substantial strategy discussion and, instead, was filled with Ballmer's banal cheerleading, and clueless declarations such as that he would work to keep the PC "the device of choice." Ballmer has been mostly panned for his leadership of Microsoft over the last 13 years, but he hopes his plan to convert the software maker into a "devices-and-services" company will leave a lasting legacy.
Finally, outside the Dow, Blackberry (BB -2.97%) shares tumbled 17% after the smartphone maker warned that it would report a near $1 billion quarterly loss, said it would lay off 40% of its staff, and revealed that it was left with $1 billion in unsold phone inventory. The Canadian company's shares had rallied earlier this year on hopes that its new Blackberry 10 smartphone would mark a comeback, but that has not won over consumers. The company has recently considered selling itself, but one way or another it looks to be headed toward the obituary page.
