Politicians Fail, Stocks Plummet


A last-minute effort to drive through an alternative solution to the fiscal cliff by the leaders of the Republican party failed last night, sending stocks sharply lower this morning. As we approach the lunch hour, the Dow Jones Industrial Average is off by 115 points, or 0.86%.

While it's easy to get discouraged on days like today, there are three points that all investors should keep in mind. First, as you can see below, stocks are up considerably this year. Since the beginning of January, the Dow is higher by more than 7%. A triple-digit loss today won't markedly change that.

Second, there's more than just the fiscal cliff weighing on the market today. Here's how Paul Vigna from The Wall Street Journal put it: "Today could be messy. It's the Friday before Christmas, so volume's liable to [be] light, relatively speaking. But it's also a 'quadruple-witching' day, meaning a whole plethora of options expire, so traders will be active either closing or exercising those positions."

And finally, for long-term investors, the failure to reach a compromise on the fiscal cliff last night doesn't fundamentally change the economic horizon, as the president had intimated that he'd veto it anyway.

In terms of individual stocks, Bank of America is leading the Dow lower, followed not far behind by JPMorgan Chase . Both of these stocks have rallied sharply this year on the back of a nascent housing recovery and increased economic optimism. Consequently, it's natural that the deadlock in Washington would at least partially deflate them today.

Also lower today are technology companies. This has been a particularly hard year for many software and hardware makers like Hewlett-Packard and Intel , both of which have suffered from the perceived decline in demand for personal computers. For the year, these stocks are down 42% and 10%, respectively.

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The article Politicians Fail, Stocks Plummet originally appeared on Fool.com.

John Maxfield owns shares of Bank of America and Intel. The Motley Fool owns shares of Bank of America, Intel, and JPMorgan Chase & Co. Motley Fool newsletter services recommend Intel. 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 Motley Fool has a disclosure policy.

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