Why the Dow Jones Is Tumbling Today

Numerous bad forecasts are weighing on the DJIA today.

May 20, 2014 at 1:30PM

The Dow Jones Industrial Average (DJINDICES:^DJI) is down 145 points as of 1:20 p.m. EDT after component stock Caterpillar (NYSE:CAT) and a number of other companies throughout the market reported disappointing earnings or forecasts. Meanwhile, the S&P 500 (SNPINDEX:^GSPC) is down 13 points to 1,872.

It's a sea of red on the stock market today:


Source: Finviz.com.

The main culprit among Dow stocks is Caterpillar, down 2.9%. Caterpillar released its three-month rolling sales report last night after the market close. The report compares three-month rolling periods to the same time last year, and the results look worrisome:


Source: Caterpillar.

Total machine sales dropped 13% versus the year-ago period -- worse than March's 12% drop. Asia-Pacific total machine sales dropped 25% versus the year-ago period, declining still faster after March's 20% drop. Caterpillar is seen as a bellwether for the global economy, as it supplies the economically sensitive mining and construction industries. It's slowdown in sales is seen as a leading indicator of the economy and bodes ill for global growth.

Around the rest of the market there were also poor earnings reports, particularly in the retail sector. Staples missed analyst expectations and forecast a drop in sales for next quarter, and the stock has dropped 13% in response. Among consumer retail stocks, Urban Outfitters and TJX Companies are down 8% and 7%, respectively, after missing expectations. Dicks Sporting Goods is down 17% after missing expectations. Many companies have high expectations priced into them and are getting large haircuts when they miss. It's not all bad news, however.

Today's Dow leader
Today's Dow leader is Home Depot (NYSE:HD), up 2.3% after the company missed analyst expectations for earnings but projected that things will get better in the second quarter. Earnings per share rose to $1, beating analyst expectations of $0.99 -- but they missed if you don't include a $0.04 gain from its spinoff of Home Depot Supply. The company raised its forecast for earnings to $4.42 per share, in line with analyst expectations.

Revenue was up 3.1% to $19.7 billion, below analyst expectations of $20 billion. CFO Carol Tome highlighted the harsh winter that made U.S. economic growth slow in the first quarter, but on the earnings call, she added: "We believe that most of the sales lost to 'snow on the ground' in the first quarter will be realized in the second quarter. Further, May sales are robust, so today, we are affirming the sales guidance."

Warren Buffett just bought nearly 9 million shares of this company
Imagine a company that rents a very specific and valuable piece of machinery for $41,000 -- per hour (that's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report details this company that already has over 50% market share. Just click here to discover more about this industry-leading stock and join Buffett in his quest for a veritable landslide of profits!

Dan Dzombak has no position in any stocks mentioned. The Motley Fool recommends Home Depot. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers