The Dow's Plunge Goes Well Beyond Europe

Don't be too quick to blame Europe for the Dow's problems.

Jul 10, 2014 at 11:00AM
Longview

On Thursday morning, concerns in global financial markets sent the Dow Jones Industrials (DJINDICES:^DJI) to a steep decline, with the index falling more than 1% after the opening bell before narrowing its loss to 0.54% as of 11 a.m. EDT. Most of the attention focused on concerns about a possible Portuguese financial crisis spreading across the continent and undercutting the progress that the European Central Bank and other policymakers have made in recent years toward stabilizing the eurozone's economy. Yet with Home Depot (NYSE:HD) and Nike (NYSE:NKE) being among the worst performers in the Dow so far today, there are clearly other factors hitting the stock market beyond a possible European problem.

Hd

Home Depot fell about 1.4% as earnings warnings from some of its home-improvement industry peers pointed to potential sales shortfalls for the quarter. Even with the housing market remaining relatively strong and the U.S. economic recovery seemingly back on track after a tough winter quarter, sales of items such as flooring and lawn and garden products forced some niche specialists in those areas to cut their guidance for second-quarter results. Analysts quickly extrapolated that poor performance to larger home-improvement retailers such as Home Depot. With so much of Home Depot's business relying on U.S. households doing renovation and remodeling projects -- whether on their own or through building contractors who are Home Depot customers -- today's drop makes it clear that concerns about the U.S. economy are also weighing on the Dow Jones Industrials.

Soccer Ball

Nike dropped 1.3% as investors assessed the company's performance at the 2014 World Cup in Brazil in the context of the impact on future sales. With pre-tournament favorite Brazil now struggling to win its third-place game and both championship contenders in Sunday's final wearing jerseys from Nike rival Adidas, many investors might well conclude that the company's foray into soccer was a waste of marketing money. Moreover, Nike's decision to end its relationship with the English Premier League organization Manchester United seems to further support the reining-in of spending on soccer. Yet Nike has worked hard to increase its sales in key international markets, and even if U.S. visibility of soccer as part of Nike's overall business strategy wanes in the months after the World Cup ends, the sport will remain an integral part of the company's global future. Economic trouble in Europe could put a dent in Nike's ambitious plans, but the sports apparel giant has had more difficulty in parts of the world that would likely be unaffected by any European crisis.

The Dow is part of the global market, and so Europe's problems will inevitably have an impact on the index. But don't be too quick to judge that all of today's decline is due to European concerns. Otherwise, you might miss other economic headwinds that could prompt further drops for the Dow.

You can't afford to miss this
"Made in China" -- an all too familiar phrase. But not for much longer: There's a radical new technology out there, one that's already being employed by the U.S. Air Force, BMW and even Nike. Respected publications like The Economist have compared this disruptive invention to the steam engine and the printing press; Business Insider calls it "the next trillion dollar industry." Watch The Motley Fool's shocking video presentation to learn about the next great wave of technological innovation, one that will bring an end to "Made In China" for good. Click here!

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Home Depot and Nike. The Motley Fool owns shares of Nike. 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