The Dow Jones Industrial Average (DJINDICES:^DJI) today was smacked by its worst one-day decline in a month after starting trading in narrowly positive territory. The fact that the worst decline in a month only amounts to 0.7% -- the Dow fell by 0.8% on May 20 and has not lost more than 1% in a day since April 10 -- might help soothe the indigestion Wall Street experienced after lunchtime, which is when the fall began. This drop is made all the more inexplicable by the fact that nothing bad actually happened -- in fact, both major tidbits of economic data released today were better than had been widely expected.
Why did investors sell off despite good economic news? It's possible that the market is becoming wary of too much of a good thing. Consumer confidence hit 85.2 this month, according to The Conference Board, which is the highest reading since January 2008. Sales of new single-family homes also touched a six-year high, at a seasonally adjusted annual rate of 504,000 -- the best level since May 2008. When you talk about things surpassing levels set in in 2008, investors understandably get a bit skittish, since that year was historically terrible by any measure.
However, it's important to remember that there were clear signs of trouble as far back as early 2007, with a number of banks and mortgage lenders sending up red flags throughout that year and well into 2008 before the Lehman Brothers collapse sparked an outright panic. No similar warning signs have been seen yet this time around, and while downturns happen, we're not likely to see a repeat of the 50% drop the financial crisis wrought on the Dow anytime soon.
All but four Dow components ended trading down today, with 2014 outperformer Intel (NASDAQ:INTC) gaining a day's best 0.9% to push its year-to-date gain to 17.5%, which trails only Caterpillar's (NYSE:CAT) somewhat inexplicable 18.8% growth. Thus far, only five Dow components have improved by double digits in 2014; since three of those components rank among the 10 lowest-weighted of the Dow's 30, the index has fallen a bit behind its more diverse index peer, the S&P 500:
Fool tech specialist Anders Bylund points out that the world's largest chipmaker may be buoyed by strong earnings from collaborator Micron Technology (NASDAQ:MU), which beat expectations and specifically highlighted a rebound in Intel's core PC market. Micron and Intel have also teamed up to embed 3-D memory architecture into Intel's upcoming Knights Landing Xeon processors, which purportedly give the chips a big bandwidth edge over typical pairings with external memory modules.
The one standout on the S&P today was Vertex Pharmaceuticals (NASDAQ:VRTX), which was the only double-digit mover in either direction and also one of single largest market-cap gainers on the day despite being far smaller than Intel. A 40% pop pushed the biotech superstar's value up by over $6 billion, compared to less than $2 billion tacked onto Intel's $150 billion market cap. Vertex soared on positive results from its phase 3 studies of combo treatment VX-809 and Kalydeco, which aims to treat the vast majority of current cystic fibrosis cases. This may be a bit excessive, but it's hard to deny the optimism investors have expressed toward new potential blockbuster drugs in a sector that sorely needs them to fund growth.
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