Why the Dow Tanked Today


Friday was a good day for the market. Monday, not so much. The Dow Jones Industrial Average (INDEX: ^DJI) fell 1.34% to 12,021.39 today.

The S&P 500 (INDEX: ^GSPC) and Nasdaq (INDEX: ^IXIC) were similarly buffeted, down 1.49% to 1,236.47 and down 1.31% to 2,612.26.

If we have to blame just one thing...
Last week, Standard and Poor's roiled the markets by placing "its long-term sovereign ratings on 15 members of the European Economic and Monetary Union (EMU or eurozone) on CreditWatch with negative implications."

In other words, it's considering downgrades.

Today, Moody's says it will be reviewing the ratings of all European Union countries (there are 27 members of the EU) during the first three months of 2012. Moody's voiced concerns that Friday's fiscal pact announcement does more for long-term problems than short-term problems (i.e. big debt and rising borrowing costs).

A more granular view
For the individual-stock investors among us, we can also look at the big moves among the stocks that make up the Dow.

There were only two winners out of the 30 Dow companies: McDonald's (NYS: MCD) (up 0.5%) and Disney (up 0.2%). Neither seems to have had anything earth-shattering to report, though.

Of the 28 Dow losers, the three biggest were:


Today's Stock Price Change

Bank of America (NYS: BAC)


Intel (NAS: INTC)


JPMorgan Chase (NYS: JPM)


Source: S&P Capital IQ.

As optimism or fear in Europe goes, so go the largest American banks. The banking sector has shown high daily volatility with each European twitch because of fears over (1) how much exposure America's largest banks truly have (2) follow-on effects of European problems in a global financial system. So Bank of America and JPMorgan falling so much on a bad day isn't surprising.

Meanwhile, Intel fell for less macro reasons. It lowered its fourth-quarter guidance, citing supply chain disruptions. Follow the chain. The flooding in Thailand that has hit hard-drive suppliers has forced computer manufacturers to use up their PC inventories. Since PC production is down, fewer microprocessors (Intel's bread and butter) are needed.

As you digest the day's news, remember that we're just looking at daily stock price movements here. It's fun to check in on the news, but at The Motley Fool, we recommend investing for the long term. These daily price movements are just small blips in the bigger picture.

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At the time thisarticle was published Anand Chokkaveluowns shares of McDonald's, Disney, Bank of America, and JPMorgan.The Motley Fool owns shares of Intel, Bank of America, and JPMorgan Chase. The Fool owns shares of and has bought calls on Intel.Motley Fool newsletter serviceshave recommended buying shares of Intel.Motley Fool newsletter serviceshave recommended creating a bull call spread position in Intel. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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