Why The Dow Got Slammed

Before you go, we thought you'd like these...
Before you go close icon

Earnings season had been going well until today. Misses by General Electric (NYS: GE) , McDonald's (NYS: MCD) , and Microsoft (NAS: MSFT) all combined to send the Dow Jones Industrial Average (INDEX: ^DJI) 205 points lower, or 1.5%. The damage added up to the Dow's worst single day since June, but the blue chips still gained slightly for the week.

Mickey D's led the tumble, falling 4.5%, after both sales and profits fell from a year ago, giving it its worst top-line growth figure in nine years. EPS of $1.43 missed estimates at $1.47, though actual profits would have been $0.08 higher without currency exchange effects. Same-store sales were also anemic at just 1.9%, the first time since 2003 that comps have been below 2%. Oddly enough, same-store sales in Europe were the strongest of its three major regions.

GE, meanwhile, dropped 3.8%, after cutting its 2012 sales forecast on poor performances from its financial and industrial divisions. Management said revenue would only grow 3% and not the 5% that it earlier predicted, and GE Capital's contribution would fall by 10%. Sales of $36.3 billion missed estimates of $36.9 billion, while adjusted earnings of $0.36 per share matched Wall Street's target. The lower financial revenue is the result of cutbacks in response to the financial crisis, and the conglomerate is also suffering from pared-back demand for its jet engines and health care equipment.


Finally, Microsoft, which reported earnings last night, fell 2.9% on lower sales and profits, as PC demand continues to slow. Revenue dropped 8%, and net income dipped 22%, though those numbers don't include pre-orders for Windows 8. Sales at other divisions were also slower than expected, such as Server & Tools, which provides back-office software to businesses.

Cisco (NAS: CSCO) and Caterpillar (NYS: CAT) , which have not reported yet, also fell more than 3%, as pessimism in the tech and manufacturing sectors mounted. Caterpillar, which will release earnings on Monday, said that its September heavy-equipment sales growth slowed to 6%.

After today's bloodbath, it could be a great time to go bargain-hunting, especially for stable blue-chip companies like the ones above that are sure to bounce back. Here at the Motley Fool, we are now offering individualized ticker reports that offer a deep dive into each stock, telling you the opportunities and risks confronting them, as well as key areas to watch. At about 2,000 words, these reports are similar to what you'd get from a high-paid brokerage, except these can be yours for just a few bucks. Better yet, they come with a year's worth of free updates, so you can stay on top off all the important news on your investments with just a single click. To get your copy of the following ticker reports, just click on the appropriate link below.

The article Why The Dow Got Slammed originally appeared on Fool.com.

Jeremy Bowman has no positions in the stocks mentioned above. The Motley Fool owns shares of General Electric Company, McDonald's, and Microsoft. Motley Fool newsletter services recommend McDonald's and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners