Mr. Market has been on one heck of a climb for the year, tempting fate each day by reaching just a little higher than the day before. It worked for a while, and even pushed to multi-year highs. But after the Dow's sprint to 13,000, the market took a big break today and recorded all three indices' biggest losses of 2012.
Here is a look at how the indices fared, a bit of the macro news playing into it, and which three components fared the worst today.
Top of Form
IndexBottom of Form
Gain / Loss
Gain / Loss %
Dow Jones Industrial Average (INDEX: ^DJI )
There were big overnight declines in Asia and Europe, which immediately started the indices off on a low note. But after the multi-month climb we've seen, a pullback like this could also do with a dose of perspective. The markets have run up virtually uninterrupted since September, shaking off Greek default fears the whole way. But eventually someone's got to turn on the lights, shut off the music, and bring the party to a close. Though no one likes to lose money, many have argued that today's sizable drop was the pause the market's needed.
Either way it's hardly a reason to run for the "sell" button. Today's drop in the context of the past few months still puts Mr. Market at lofty levels.
Of course, in an index of 30 components there will be a spectrum of performance, with some stocks performing worse than others. Today 29 of those 30 components ended in the red. Intel (NAS: INTC) edged out a modest 0.24% gain for the day. The three stocks that fell the most were Alcoa (NYS: AA) , Caterpillar (NYS: CAT) , and Hewlett-Packard (NYS: HPQ) .
Alcoa's 4.1% decline for the day shouldn't be particularly surprising, considering the highly cyclical nature of the company and its sensitivity to Europe. Alcoa had a rough 2011, but is one of the favored Dow stocks to outperform in 2012. Continued volatility from Europe will send them down on days like this, but I believe that on the aggregate they will march upward throughout the year.
Caterpillar's 3.8% beating for the day is the same story. The heavy-equipment manufacturer is a highly cyclical company that can be expected to take outsized hits on international jitters. The company is still one of the best performing Dow stocks year to date. If you're confident in the emerging-market growth story, I wouldn't let today's drop scare you -- Caterpillar's future is intrinsically linked to development in the emerging world.
Hewlett-Packard fell 3.4% today, placing them firmly in the undesirable position of worst-performing Dow stock of 2012. The ailing computer company has struggled to recover lost luster in the tech world. With a product portfolio that inspires less confidence than the revolving door of their top management, I can't say I'm very hopeful.
How to play it
In the face of today's drop there was one fast-growing emerging market stock that fell just a paltry 0.2%. It's a Latin American retailer that our chief investment officer has named "The Motley Fool's Top Stock for 2012."
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At the time thisarticle was published Austin Smith owns shares of Intel. The Motley Fool owns shares of Intel.Motley Fool newsletter serviceshave recommended buying shares of 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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