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What Caused the Dow to Drop Today?

By Matt Thalman - Apr 17, 2013 at 9:42PM

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For the third day in a row, the Dow moves more than 100 points in a single session.

Earnings and expectations are ruling Wall Street this week. As we move deeper into earnings season, investors are focusing more on actual results, and it's becoming very clear that those earnings are driving the markets, not the hot news story of the day. And regardless of whether the market moves up or down for the day, it is very refreshing to see this happen.

But what is still disconcerting is that although earnings and, in some cases revenues, are climbing, shares prices are dropping simply because analysts expected better results than what is being reported. This is preciously what happened today. Bank of America (BAC -1.71%) released first-quarter earnings, and profit quadrupled to $0.20 per share, but Wall Street expected $0.22 per share and the stock fell 4.72% during the day, and with the help of another 25 components, managed to pull the Dow Jones Industrial Average (^DJI 0.03%) lower by 138 points, or 0.94%, during the day.

More Dow losers
Shares of Alcoa (AA) were on the losers' side again, after the stock fell 1.73% today. Alcoa is already down 8.29% since the start of 2013 after falling 5.9% in 2012 and 43.7% in 2011. You have to go back to 2008 to find a full year when Alcoa's stock rose higher. The company faces a number of heads in the future, increased competition from smaller local producers also in China, which is likely the cause for the oversupply in the country, and when supply outpaces demand, aluminum prices decline. To learn the three reasons my Foolish colleague Taylor Muckerman believes you should sell Alcoa, click here.

As investors prepare themselves for Verizon's (VZ 0.88%) earnings report, set to be released tomorrow, shares dropped 1.82% today. Analysts expect the company to report earnings of $0.66 per share. Based on today's drop, it would seem investors felt that may be too high and are selling ahead of tomorrow's announcement.  

Another big loser today, on very little news, was Travelers (TRV -0.63%), which lost 1.71% of its value. The insurance provider was likely pulled lower along with the other financial related stocks due to the earnings report release from Bank of America, in which the company missed analysts' expectations on per-share earnings. A number of the financial institutions that hardly relate to B of A's operations, or even those that do such as JPMorgan Chase but have recently announced their own results, were pulled lower by the whirlpool effect that Bank of America caused this morning. To read more about what happened to B of A and JPMorgan today, click here.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$31,261.90 (0.03%) $8.77
The Travelers Companies, Inc. Stock Quote
The Travelers Companies, Inc.
TRV
$168.24 (-0.63%) $-1.06
Bank of America Corporation Stock Quote
Bank of America Corporation
BAC
$33.86 (-1.71%) $0.59
Alcoa Inc. Stock Quote
Alcoa Inc.
AA
Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
VZ
$49.53 (0.88%) $0.43

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

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