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Dow Falls on Weak Economic News

By Jessica Alling - Apr 3, 2013 at 12:00PM

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After closing at another record high, the Dow lost steam following two economic reports that came in below expectations.

Another record high for the Dow Jones Industrial Average (^DJI 1.76%) was hit yesterday, as the index rallied following positive news from the automotive sector and factory sales data. But just as quickly, the index has lost 62 points so far this morning on disappointing economic news. With the Dow continuing to climb to new heights on any given day, it's clear that investors are keeping a close eye on news reports and balk at any sign that there may be trouble in the water.

First up this morning was the ADP private-sector payroll report for March. The report showed that job growth slowed considerably from February's surge of 237,000 jobs, with only 158,000 new jobs added. This also missed the consensus estimate of 197,000 new jobs. March was the slowest month since October, mainly due to a decrease in hiring by construction companies, which had been adding new jobs at a rate of 29,000 per month.

Next was the ISM non-manufacturing index data -- and though analysts had expected a decrease, March numbers came in at a five-month low. Dropping to 54.4 from 56.0 in February, March's results came in far below expectations of 55.8. A result above 50 still signals an expanding economy, but any sign of slowing can give investors serious concerns.

Financials fall
As the Dow dropped this morning, the financial sector was right there with it. One of the most scrutinized sectors in the market, financials are used to the fluctuations caused by investor uncertainty. Bank of America(BAC 0.95%) is certainly no stranger to sudden drops, including this morning's 2.88% fall so far. Due to the bank's large trading volume, it is extremely volatile and susceptible to big swings. On top of this morning's economic disappointment, the bank is dealing with some investor pushback from its continued legal battles. B of A will be paying $165 million in a settlement over its sale of mortgage-backed securities that led some corporate credit unions to fail. Though the settlement will be covered by the bank's existing legal reserves, continued court battles only bring the financial crisis back into the minds of investors, leading to negative sentiment toward the company.

JPMorgan (JMP) is on a similar path this morning, down 2.07% so far in trading. Much like Bank of America, JPMorgan is dealing with issues from the past that have reduced its shareholders' certainty about the bank. With federal investigators putting the full-court press on the bank regarding its London Whale disclosures, it seems that JPM will be under the magnifying glass for quite some time yet. Perhaps more telling for the bank, however, is today's ex-dividend date. The $0.30 per share dividend will be available to shareholders at the end of the month, and leading up to today's ex-dividend trading, the stock was climbing higher.

American Express (AXP 2.56%) is also sliding this morning. Down 0.87% so far in trading, the personal finance company shares the same ex-dividend date as JPMorgan -- today. With its recent announcement that its joint venture with Wal-Mart, the Bluebird card, would be supporting government-related payments and FDIC insurance, AmEx was enjoying a surge late last month. Though today's drop won't come close to eliminating the bluebird-related gains, American Express may see some more action later this week when the Federal Reserve releases its latest consumer credit data.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$33,212.96 (1.76%) $575.77
Bank of America Corporation Stock Quote
Bank of America Corporation
$37.02 (0.95%) $0.35
American Express Company Stock Quote
American Express Company
$169.60 (2.56%) $4.23
JMP Group LLC Stock Quote

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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