The One Stupid Reason the Dow Tumbled 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 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 (DJINDICES: ^DJI  ) 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 (NYSE: CAT  ) 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 (NASDAQ: MSFT  ) 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 (NASDAQ: BBRY  ) 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.

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  • Report this Comment On September 21, 2013, at 1:06 AM, themannyfool wrote:

    I would love to comment on the FREE report "3 Ways to Build a Better Investing Strategy Today", but after 3 attempts to download the report I get a 404 ERROR FILE NOT FOUND.

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  • Report this Comment On September 21, 2013, at 2:07 AM, yaovk wrote:

    These anti Christ republicans, who want to deprive health care for the lower middle class and poor, are fixated with agenda which are to kill Obamacare and cut food stamp by $40B. Their fixation have caused them to neglect their responsibilities to address more important economic and financial issues facing this nation..

    These republicans are bunch of thugs who cannot accept our democracy that the majority have voted for Obamacare and the supreme Court sanctified it when challenged by these traitors.

    While I am against taxes, but when you look at the growth in disparity between the 1% rich and the rest of the 99%. you wonder why these german shepherds would bite their own tails to support their funding masters, the rich.

    I have nothing against the rich. But do the 1% really want to own more than 50% of the total wealth or they want to own 75% to bring communism to this country. I am sure some do to stay in the Forbes list. But overall, I don't think the rich are that stupid but those sore losers in the tea party and their captive GOP folks are. This is the ugliest congress I have seen in 6 decades.

    It is time we halve the number of congressmen. Their pay, perk, retirement, health benefit, and other benefits are completely outside from the rest of Americans. They don't give a damn about us since they are not part of us. We just cannot afford them for they are the problems and not the solutions. America Inc. cannot afford these high pay, mean and unproductive sacred cows.

  • Report this Comment On September 21, 2013, at 9:03 AM, Boateducator wrote:

    "Antichrist Republicans"?? Lets leave religion out of it, shall we? The FACT of the matter is the more and more of the US population is on the government nickel. While I don't mind funding the truly poor and needy of our population, there's FAR too many getting government assistance that ABSOLUTELY DON'T NEED IT. More and more get as much as they can from the government because they find it easier than going out and busting their hump at a real job. Immigrants are still POURING into this country and when they get here, the first thing a great majority do is to apply for government assistance. The scales are tipping in the wrong direction. More and more people let the government take care if them instead of trying to make it on their own. Then, these folks vote for the politicians (like Obama) who continue to promote the assistance

  • Report this Comment On September 21, 2013, at 9:15 AM, Boateducator wrote:

    As far as your comment regarding a communistic society goes...we are definitely headed in that direction. Obamacare goes a long way towards accomplishing a turn towards it. It will bankrupt this country and any who can't see that are just ignoring the pure math of it.

    I've heard that more than half the population of the US now receives some sort of Government assistance. If people keep voting in politicians who promote programs where people get things handed to them, our society will look far more communistic than democratic in a very short time.

  • Report this Comment On September 21, 2013, at 1:17 PM, canuckeconomist wrote:

    Looking at the use of fiscal policy from outside the country, I must say that I just shake my head!

    The greatest country on earth became the greatest country because it had some pretty wise fathers that envisioned a society that promoted individual freedoms but recognized that there was a strong role for a federal government - and yes, that meant spending and not just on social stuff. They set up a system of checks and balances but no amount of good constitution will save you when you have incompetence.

    A strong country needs a strong physical infrastructure but it also needs a strong institutional infrastructure. The real power in the US resides with Congress not with the President, I am sad to say that Congress in the US is broken! It has lost its ability to compromise to maximize the welfare of its citizens. (This is not the fault of just one camp - Congress in its entirety seems to me is to blame.

    Contrast the collaboration in the US versus Canada during the 2008 crisis. In Canada, even though we had a conservative government with a minority, it brought in a stimulative budget that put it in a large deficit situation. The opposition, instead of defeating the government, managed to approve the Budget because, even though it was not in its best political interests, it was in Canada's best interests. In the US, the "opposition" (which covers republicans and some democrats) not only would not agree to increases in spending, they actually implemented cuts. This left the US limping on just one policy leg (monetary policy) as the move gutted the ability of the federal government in the US to use fiscal policy. There were also some errors on the monetary side as well.

    More importantly, countries like Canada and Europe, US Allies, who normally look to the US to take a leadership position on this kind of thing, were left to their own devices. We care because when the US catches a cold we catch pneumonia. Canada may have to start looking to diversify away from its reliance on US. Pity!

    Congress is now vying to repeat the feat, as if to confirm that Congress is broken. I am very saddened by the shape the US is in; I think it is a real pity. I think the US voters to question this blind party-means-all attitudes and need to start pressing their Congressmen to collaborate and compromise rather than act in selfish political interests - the only way to restore the US to its former greatness.

  • Report this Comment On September 21, 2013, at 1:33 PM, 092326 wrote:

    Our President and the left in our society are intolerant of any view other than their own and refuse to negotiate. Rather than discuss the issues they prefer to castigate the right. I am a Moderate and decry the senseless impasse we experience today.

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