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Dow's Fortune Cookie Says, "You Should Have Sold Yesterday"

By Jeremy Bowman - Updated Nov 17, 2016 at 4:25PM

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Today was the worst day of the year for the market as commodities and stocks crumbled after a disappointing GDP report from China.

Stocks and commodities were getting crushed today after China reported a worse-than-expected first-quarter GDP. Economists had projected growth at 8%, but the world's second-biggest economy delivered an increase of just 7.7%. The Dow Jones Industrial Average (^DJI 1.76%) finished the day down 1.8% as all 30 components fell. Today was its worst performance of the year, but it still beat out essentially every other major market indicator. The S&P 500 and Nasdaq were off 2.3% and 2.4%, respectively, while oil prices were down 2% and gold futures dropped a whopping 9% to a two-year low. Commodities were down across the board as China is seen as the world's primary buyer for metals, energy, and similar goods.

Adding further to market jitters was a report from the National Association of Home Builders showing that its housing market index fell unexpectedly. The rating dropped from 44 to 42, while economists had expected an increase to 45. The housing sector has been one of the more bullish areas of the economy of late so any pullback is likely to leave investors thinking twice about the overall recovery. A New York State manufacturing index also showed weaker results than expected for April.

Not surprisingly, commodity makers and related stocks were the worst performers among the blue chips. Caterpillar (CAT 1.95%) fell the most, dropping 3.2%. The earthmoving-equipment company is highly dependent on demand in China, and slowing growth will weigh on the stock. Alcoa (AA) was down 2.2% for a similar reason as it needs a strong construction market and demand for aluminum in China to boost prices for the metal. Alcoa already reported earnings to a tepid response from the market last week, while Caterpillar will report next Monday. Analysts expect EPS of $1.44 on revenue of $13.81. Both figures are significantly down from a year ago.

Oil giants Chevron (CVX 0.96%) and ExxonMobil (XOM 0.98%) were also down sharply, each falling 2.8% on lower oil prices. Oil prices are sensitive to overall economic activity and cooler growth in China will ease demand. Chevron and Exxon are rarely big movers in the Dow, but with oil prices now under $90 a barrel, the energy producers could see a recovery in the commodity soon.

Today is tax day, of course, but the good news for investors is that the dissemination of refunds could help spur consumer spending in the coming months despite whatever woes come from China or elsewhere.  Investors will also be anxious to see the fallout from the explosions in Boston this afternoon, which could renew concerns about terrorism and stir a potential market panic.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$33,212.96 (1.76%) $575.77
Caterpillar Inc. Stock Quote
Caterpillar Inc.
CAT
$217.14 (1.95%) $4.15
Alcoa Inc. Stock Quote
Alcoa Inc.
AA
Exxon Mobil Corporation Stock Quote
Exxon Mobil Corporation
XOM
$97.59 (0.98%) $0.95
Chevron Corporation Stock Quote
Chevron Corporation
CVX
$178.28 (0.96%) $1.69

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

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