Why Wal-Mart and Merck Led the Dow Down This Morning

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.

Late last week, investors seemed to think the government would finally resolve its shutdown and extend the debt ceiling higher in order to make more time for further negotiations. The big rally in the Dow Jones Industrials (DJINDICES: ^DJI  ) reflected that optimism. Yet stalled talks over the weekend reversed those high expectations, and stocks are suffering this morning as a result. The Dow was down 73 points as of 11 a.m. EDT as market participants once more prepare for a worst-case scenario of a sovereign-debt default and continued economic pressure from the shutdown.

Looking at the Dow's worst performers, you can see shareholders' concerns about potential economic fallout from the shutdown crisis. Wal-Mart (NYSE: WMT  ) was down 1.3%, giving back some of its gains over the past two days and renewing a downward trend that began late last month. The big-box retailer is highly attuned to those customers who are mostly likely to be struggling from the government shutdown. Even though government workers themselves might get retroactive pay restored that could provide relief, people in related industries might well not get the same benefits. Wal-Mart could find itself at the center of the drop in sales that could result from cash-strapped customers not having the money to spend.

Merck (NYSE: MRK  ) also was among the Dow's biggest losers, declining 1.6%. After an analyst at Jefferies gave a negative view on the drugmaker's stock late last week, another analyst piled on today with a downbeat call. Even though many customers need Merck's drugs for their health, the pharmaceutical giant is nevertheless vulnerable to the same economic stresses that lead its customers to make tough financial choices. In some cases, Merck's customers will go without a needed medication in order to make ends meet. Moreover, Merck's ongoing struggle to boost its pipeline in light of key patent expirations will keep pressuring the company well into the future.

Finally, financial stocks are feeling the pain from the government's lack of action this morning. Goldman Sachs (NYSE: GS  ) and JPMorgan Chase (NYSE: JPM  ) both fell more than 1% as investors continue to weigh the quarterly results that different banks have reported recently. Goldman will report later this week, and it stands to suffer from many of the same headwinds that JPMorgan faced when it announced its results late last week. JPMorgan has been hit with more extensive legal liability, but Goldman will nevertheless have to deal with more sluggish bond markets and the potential impact of rising interest rates on its bottom line.

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