The markets are off to a slow start this week, setting an ominous tone on the day before the third-quarter earnings season officially begins. With a little more than an hour left in the trading session, the Dow Jones Industrial Average (INDEX: ^DJI) is down by 33 points, or 0.25%. Traders have fixed their eyes across the Pacific Ocean in search of an explanation.
Bad news from Asia stirs fear
The market's overall direction today follows estimates released by the World Bank hinting at slower economic growth in Asia. According to the report, output growth in East Asia and the Pacific region may slow down from 8.2% last year to 7.2% this year. With respect to China specifically, moreover, the World Bank says weak exports and lower investment levels will decrease the country's output expansion to 7.7%, down from 9.3% last year.
These results sent shivers through the markets, as Asia has become an increasingly dominant force in the global marketplace. A statement by World Bank President Jim Yong Kim underscored this point by noting: "The East Asia and Pacific region's share in the global economy has tripled in the last two decades, from 6% to almost 18% today, which underscores the critical importance of this region's continued growth for the rest of the world."
In other news, members of the eurozone met today in Luxembourg to discuss the continent's fiscal woes. Policymakers there are particularly concerned by Spain's continued reluctance to ask for help, a move that would reduce the country's borrowing costs. Adding fuel to the fire are a series of protests in Spain by people claiming their deposits were illicitly converted into preferred equity shares that are now worthless.
The Dow's best and worst performers
As of 2:45 p.m. EDT, Dow stocks are evenly split, with 15 heading higher and 15 in the red.
Alcoa (NYS: AA) has had a rollercoaster day, having been one of the day's biggest gainers before sliding back for a 0.2% loss. Long considered an economic bellwether, the aluminum giant kicks off third-quarter earnings season tomorrow. Analysts expect the company to break even, forecasting net income of $0.01 a share compared with the same quarter last year, in which it earned $0.14 a share.
Meanwhile, the Dow's newest member and the biggest health insurance company in the United States, UnitedHealth Group (NYS: UNH) , is up more than 1%. Earlier today, it was reported that UnitedHealth has agreed to buy 90% of Amil Participacoes, a Brazil-based hospital chain and health insurance company, for $4.9 billion. The deal will give UnitedHealth a strong foothold in one of the world's most promising emerging economies, as Amil is Brazil's biggest managed-care company.
Alternatively, leading the Dow lower is Home Depot (NYS: HD) . Given its direct link to the housing market, the home improvement giant tends to react negatively whenever bad news about the domestic and/or global economies emerge. In its last earnings report in the middle of August, the retailer beat analysts' estimates and raised its fiscal-year earnings outlook. It now expects 2012 sales to increase by 4.6% on a year-over-year basis. As I noted a few weeks ago, shares in Home Depot are outperforming all other Dow components for the year, with the exception of Bank of America (NYS: BAC) . The two are up 53% and 68%, respectively.
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