The Dow Jones Industrial Average (INDEX: ^DJI) slipped 0.35% today as energy stocks led the retreat. Overall, 20 of the 30 Dow stocks ended the day in negative territory, while nine stocks rose and one company slipped. Energy stocks in particular were in retreat after charges were filed against Chevron (NYS: CVX) employees for varying infractions relating to an oil spill off the coast of Brazil. Those charges will probably cause multinationals to shy away from the booming Brazilian offshore oil market.
The Dow's three biggest losers
However, the three Dow stocks that saw the biggest drop didn't come from the energy market.
Source: S&P Capital IQ.
Instead, we had Hewlett-Packard heading up the loser column. The company announced last night that it will merge its PC and printer units. Since the two units have a natural cross-sell and real cost savings can occur over time by "de-siloing" big corporate segments, such a combination seems benign enough, and it's surprising to see HP sell off so much on the news. Still, the question comes down to whether HP has good product strategy or whether this strategy shows it's once again trying to cut its way to greater profitability.
The other two big drops today come compliments of Alcoa and Caterpillar. Continuing uncertainty about China's growth in the year ahead is probably the factor that drove down their shares today. Both companies are heavily levered to China's growth. Caterpillar, for example, saw sales jump 49% in Asia last quarter and projected heady growth of 6.5% across the continent in 2012. Likewise, Alcoa relies on strong growth out of China to keep global aluminum prices elevated. The country accounts for more than 40% of aluminum production.
My take on the situation is that while there might be negative signs coming out of China today, its long-term future is bright. If companies like Caterpillar at the center of the China growth story continue getting beaten down, they're great watchlist candidates as leaders in the economic story of the decade.
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At the time thisarticle was published Eric Bleeker owns shares of no company listed above.Motley Fool newsletter serviceshave recommended buying shares of Chevron. 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. The Motley Fool has adisclosure policy.
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