Why These 3 Dow Stocks Tanked Today

After plunging 0.7% at first, TheDow Jones Industrial Average (INDEX: ^DJI) rallied to limit its losses for the day to 0.1%. But a few stocks fared much worse. These were the three biggest losers:


Price Change

Alcoa (NYS: AA)


Caterpillar (NYS: CAT)


Bank of America (NYS: BAC)


After suffering through last week's announcement of disappointing manufacturing data, manufacturing and economically sensitive stocks took the plunge again today.

What's the occasion? In his state of the nation address, Chinese Premier Wen Jiabo targeted a goal of 7.5% GDP growth in 2012. That doesn't mean growth will necessarily come crashing down to that precise rate, as China does tend to overshoot its growth targets, but lowering the outlook from 8% is bound to raise a few eyebrows. Caterpillar generates a quarter of its revenue from the Asia/Pacific region, and the company has made Chinese expansion a core part of its growth strategy. Alcoa has fewer direct sales to China, but a slowdown in infrastructure-hungry emerging economies is hardly the sort of thing materials producers want to see.

As I've been saying lately, with energy prices up on geopolitical concerns, it's easy to see how we could experience a bit of rockiness in construction, materials, and manufacturing in the coming weeks. Slightly slower growth out of China isn't a disaster. But with the U.S. engaged in a tentative recovery and Europe desperately trying to avoid implosion, our interconnected global economy really doesn't need a major emerging-market slowdown.

Bank of America was down today after strong employment reports helped it post the second highest gains among all Dow stocks for last week. In addition to today's dour economic tidbit, Wall Street is lobbying the Federal Reserve to withhold certain details from its most recently conducted stress tests from the public that bailed it out. Analysts are also beginning to question their (let's face it) absurdly optimistic assumptions for BofA's earnings this year. BofA's Dow peer JPMorgan Chase (NYS: JPM) , which also has considerable international operations and was a part of the lobbying effort, was down 0.6%.

So what do we make out of this? Three things: The near-term manufacturing/emerging-market/energy-inflation story is still in force. Major Wall Street banks may not be in as tip-top shape prudential shape as the market sometimes pretends they are.

And finally, although Alcoa, Caterpillar, and Bank of America all lost to the market today, it's important to remember that what happens to the market on a day-to-day or even week-to-week basis doesn't matter nearly as much as how our stocks perform over the long run. If you're interested in one stock that our chief investment officer picked to crush the market, check out our brand-new report, "The Motley Fool's Top Stock for 2012." It highlights a company that is revolutionizing commerce in Latin America. For a limited time, you can get instant access to the name of this company for free.

At the time thisarticle was published Ilan Moscovitzdoesn't own shares of any company mentioned. The Motley Fool owns shares of JPMorgan Chase and Bank of America. 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 Motley Fool has adisclosure policy.

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