Why the Dow Is Down More Than 100 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 Dow Jones Industrial Average (DJINDICES: ^DJI  ) is down for the third day in a row as investor fear grows that the Fed will pare back its quantitative-easing program. The Dow is also down after a Detroit judge ruled that the beleaguered city can declare bankruptcy. As of 1:30 p.m. EST the Dow was down 118 points to 15,891. The S&P 500 (SNPINDEX: ^GSPC  ) was down nine points to 1,792.

Yesterday the Dow finished the day down 0.5% following better-than-expected manufacturing surveys from both Markit and the Institute for Supply Management. Positive economic data is, perversely, seen as bad for the market, as it raises the chance that the Fed will soon taper its asset purchases. The Federal Open Market Committee is set to meet Dec. 17 and 18, and among the economic metrics it will consider are the updated jobs reports for the past few months and the inflation numbers due to be released on Friday. The Fed has said it will begin "tapering" when the unemployment rate drops to about 6.5% to 7%, though some Fed officials want that target lowered to 5.5%.

In other news, a U.S. bankruptcy judge has ruled that the city of Detroit can pursue bankruptcy protection. The judge also decided that the city's pension obligations are contracts and are not protected by state law. Opponents -- largely creditors such as labor unions, retirees, and pensioners, who stand to lose the most if the city goes bankrupt -- have vowed to appeal. Detroit has struggled to cope with a 50% population drop, as well as economic mismanagement that has resulted in $18 billion in debt. The city's interest payments currently take up 40% of the city's budget and are expected to rise to 65% in the coming years if no changes are made.

While the city is now allowed to declare bankruptcy, it must first decide how to readjust its debt, and it may also have to contend with appeals by its creditors.

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