Why the Dow's Cascading Downward Today

There's never been more of a slow-motion train wreck in the market than we saw this morning. Ever since last Friday, when the government published disturbingly weak jobs numbers, we knew the market was in for a rough ride. But because the stock exchanges were closed Friday, we had to wait until today to get the expected drop -- and with many European markets still closed today as well, we won't see the full impact worldwide until tomorrow. At about 10:45 a.m. EDT, the Dow Jones Industrials (INDEX: ^DJI) fell 126 points to 12,934, while the S&P 500 (INDEX: ^GSPC) dropped 16 points to 1,382.

Among Dow stocks, financial stocks posted big declines, with Bank of America (NYS: BAC) , JPMorgan Chase, and American Express all down 2% or more. The obvious fear here is that a weaker economy could reignite credit problems among borrowers, potentially reversing the major gains banks have made in getting their balance sheets cleaned up and in better condition. One jobs report shouldn't be enough to have a material impact, but after months of bullishness, a radical change in sentiment could prove problematic for financials in particular.

Disney (NYS: DIS) was also down more than 2%. The huge and continuing success of TheHunger Games, which jumped above the $300 million mark in box office receipts since its March 23 release, stands in stark contrast to the failure of mega-bomb John Carter, which forced the company to take a $200 million write-off.

Finally, Caterpillar (NYS: CAT) was down sharply. Analysts have focused on Caterpillar's global growth initiatives, but the company is actually making a substantial foray into domestic operations as well. Reuters reported this morning that Caterpillar has built or renovated 15 facilities in the U.S. in just the past two years, adding tens of thousands of jobs. Slowing economic growth could make this a misstep, but if the U.S. rebound continues, Caterpillar will be ahead of the curve.

Some perspective
It's important to remember that even with today's declines, the Dow is less than 3% below its recent highs -- and still up more than 5% on the year. Moreover, even stocks that are down today can be tomorrow's winners. The Motley Fool's latest special report on retirement gives you the names of three promising stock picks for long-term investors. Get your free report today before it's gone forever.

At the time this article was published Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. You can follow him on Twitter here. The Motley Fool owns shares of Bank of America and JPMorgan Chase. Motley Fool newsletter services have recommended buying shares of Walt Disney, as well as writing a covered strangle position in American Express. 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 Fool has a disclosure policy.

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