Behind the Dow's May Slump

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With the stock market down again this afternoon, the Dow Jones Industrials (INDEX: ^DJI) are poised to post their 11th losing day in the past 12 trading sessions. Ever since a May 1 rally seemed to put the lie to the idea that investors should sell in May and go away, the Dow and its fellow market measures have fallen steadily. With the Dow now down 750 points in just over two weeks, some believe that the average will end up posting a full-blown correction of 10% or more.

But which stocks are the biggest culprits behind the Dow's May slump? Let's take a look at the biggest decliners since May 1:

Stock

Return Since May 1

JPMorgan Chase (NYS: JPM) (21.4%)
Cisco Systems (NAS: CSCO) (16.6%)
Bank of America (NYS: BAC) (14.8%)
Alcoa (NYS: AA) (14.1%)

Source: Yahoo! Finance.


JPMorgan Chase's travails have been well publicized, with the bank having plunged after news that it had lost what now appears to be $3 billion or more on a bad hedging strategy involving credit derivatives. The loss itself may only be the tip of the iceberg, as the episode once again has raised questions about whether financial regulation still isn't going far enough to protect against trading mishaps at systemically important institutions.

For its part, Cisco had more industrywide problems to deal with when it made its quarterly report earlier this month. Although sales and earnings came in at reasonable levels, what scared investors was the guidance that CEO John Chambers gave. With comments citing "significant uncertainty" in general economic conditions, shareholders lost confidence that Cisco would be able to avoid falling sales in future quarters.

Bank of America seems to be following the rest of the banking sector down after a huge run-up to start 2012. Although many cite European fears as a contributing factor to declines in financials, B of A has relatively little exposure to Europe in terms of net revenue.

Finally, Alcoa has struggled with continuing weakness in aluminum prices and the specter of slower growth in emerging economies. Although an active market in aircraft sales should help the aluminum market, aluminum producers around the world are cutting back on capacity.

When will the slump end?
It's impossible to know when the Dow may bounce back from its recent drop. What's important to realize, though, is that no matter which way the Dow moves, you'll always find some stocks that lag behind its performance.

Of course, the market always has some winners in it as well. To find one great prospect, read our recent special report in which the Fool's chief investment officer reveals a stock he has hand-selected and named the Motley Fool's top stock for 2012. You can get access to the free report and find out the name of this legendary company right now.

At the time this article was published Fool contributorDan Caplingerdoesn't own shares of the companies mentioned. You can follow him onTwitter. The Motley Fool owns shares of Bank of America, Cisco Systems, and JPMorgan Chase. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Fool has adisclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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