Is there Trouble Over the Horizon for the Dow?

For the second day in a row, all three major indexes are trading flat to slightly negative. The Dow Jones Industrial Average (INDEX: ^DJI) is off seven points, or 0.05%, with the Nasdaq declining a similar 0.15% and the S&P 500 seeing today's biggest decline -- a whopping 0.21%. With a lack of market-moving economic data, the market has just treaded water near multiyear highs, while the VIX (NYS: VXX) volatility index stays plastered against 52-week lows.

One bit of emerging global news that could become a bigger story is unrest in China over Japan's claim to a small group of islands in the East China Sea. The sovereignty of these islands has been disputed for a long while, but as Japan is purchasing them from a private owner, it has reignited those tensions. They are strategic resources -- not just for potential energy resources, but also for their proximity to mainland China. It also doesn't help that today is the 81st anniversary of the Manchurian incident. In response, China has seen nationalist protests and wanton destruction of Japanese vehicles and Japanese-owned businesses, causing companies like Toyota (NYS: TM) to temporarily suspend some operations. The last thing the global economy needs is a serious flare-up between the Asia-Pacific region's two economic powerhouses.

On the Dow, stocks are mixed, with about two-thirds of the index in the red. The largest gainer is Kraft, up 1.3% on the day, likely marking the last time the consumer goods company will lead the index. Unitedhealth is set to replace Kraft after the multinational food company split its business into two separate entities. Two of the largest decliners are United Technologies (NYS: UTX) and Alcoa (NYS: AA) , both down slightly more than 1%. Alcoa has seen sustained selling since its post-QE3 rally, and while no specific United Tech-related news caused the decline, new campaign troubles for Mitt Romney may have dampened the likelihood of a defense-industry-friendly President in investors' eyes.

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