Why the Dow Plunged Today

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After finishing its worst month in two years yesterday, investors may have been asking themselves whether the Dow Jones Industrial Average (INDEX: ^DJI) would turn itself around in June. Unfortunately, at least for now, the answer is an emphatic "no."

Today, a dismal U.S. jobs report combined with weak manufacturing data from around the world to help drop the Dow down more than 2%. That was enough to push the blue chip index into the red for all of 2012.

The day got off to a bad start before the bell, when U.S. jobs data showed that payrolls increased by just 69,000 in May, the smallest increase in a year. On top of that, April's jobs number was revised significantly lower that initially reported. Manufacturing data from around the world was also underwhelming. U.S. manufacturing growth slowed more than expected in May, while eurozone manufacturing contracted for the 10th straight month. Asia wasn't immune, either -- manufacturing in China grew less than expected in May, leading more investors to call for stronger stimulus from the government.


Let's check the damage and see how the three major U.S. indices fared on the day:

Index

Change

Ending Value

Dow Jones Industrial Average-274.88 [-2.22%]12,118.57
Nasdaq-79.66 [-2.82%]2,747.48
S&P 500-32.29 [-2.46%]1,278.04

It didn't get any prettier looking at individual stocks; all 30 Dow components finished the day in negative territory. Hewlett-Packard (NYS: HPQ) was the biggest Dow loser, plummeting 6.3%. The poor U.S. economic reports certainly didn't help the stock, but perhaps the biggest catalyst for the drop was a downgrade to "hold" from Peter Misek of Jeffries & Co., saying that the company could continue to be hurt by its lack of a meaningful presence in the smartphone and tablet computer space.

The financial sector as a whole seemed to take the hardest hit today, with Bank of America (NYS: BAC) dropping 4.5%, American Express down 4.3%, and JPMorgan Chase (NYS: JPM) falling 3.7%. Considering the financial sector is one of the most sensitive to consumer habits and the economy as a whole, this is not terribly surprising. Still, Bank of America remains the Dow's top performer in 2012, up 26% year to date.

Outside the Dow, Facebook (NAS: FB) continued its slide, dropping 6.4%. The stock wasn't able to replicate yesterday's improbable comeback when it rallied from down 4% to finish up 5% in just a few hours of afternoon trading. There continue to be plenty of events for Facebook investors to digest, including the rumors of a Facebook smartphone, a potential takeover of Web browser company Opera Software, and the beginning of options trading on the stock this week. Above all, investors continue to wonder whether the company can do a better job of monetizing its huge user base and mobile traffic.

The big picture
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At the time this article was published Brendan Byrnes owns no shares of any company mentioned above. The Motley Fool owns shares of Facebook, Bank of America, and JPMorgan Chase. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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

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