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Why the Dow Is Cratering

John Maxfield
October 10, 2012

With earnings season now underway, the Dow Jones Industrial Average (INDEX: ^DJI  ) seems far from upbeat. Late in the trading session, the blue-chip index is down by more than 126 points, or 0.94%.

The decline comes amid a wave of ominous economic news. On Monday, the World Bank released updated predictions for growth in Asia. According to its report, output expansion in the Asia-Pacific region is expected to decrease from 8.2% last year to 7.2% this year. This report was followed on Tuesday by a similar take on the global economy from the International Monetary Fund which said, "Risks for a serious global slowdown are alarmingly high."

In addition, analysts and traders are concerned about downbeat corporate earnings. As I noted yesterday, a recent report predicted that S&P 500 earnings as a whole will drop by 2.7% this quarter. And my colleague Alex Dumortier has been warning about an impending "earnings recession" for more than three months now. Back in July, Alex observed that then-outstanding bottom-line performances had encouraged analysts to raise estimates of corporate earnings and thereby "sown the seeds of earnings disappointments -- and stock declines -- over the next few quarters."

The results released yesterday by Alcoa (NYSE: AA