Why the Dow Plummeted 120 Points Today


In the past few weeks, every day has brought with it a fresh sentiment about the broader direction of the economy. Today that sentiment was decidedly negative, as House Speaker Boehner cancelled a vote that could have raised taxes on millionaires and bridged the political divide over the fiscal cliff. Instead, that divide seemed to grow, causing greater unease over a prompt resolution to the issue; The Dow Jones Industrial Average was hit as a result, falling 120 points, or 0.91%, to close at 13,190.

Gaining less than 0.2%, McDonald's was one of only two stocks in the Dow to rise today. Given the (incrementally) increased possibility of a recession, perhaps markets are bidding up shares in anticipation of a dramatic and sudden nationwide shift to the dollar menu. Also, yet again we saw Bank of America shares exhibit greater volatility than the wider market, losing 2% of their value as financials suffered.

Intel shaved 1.3% off its market value. Despite its 4.3% dividend and sub-10 P/E ratio, investors didn't find shares in the chipmaker to be a compelling buy. Nor have they for most of the year: Intel's 11% decline in 2012 means the stock has underperformed the Dow by about 20% thus far. One has to consider whether Wall Street is overreacting to the fiscal cliff issue and punishing quality companies like Intel as a result.

Another chip maker, Advanced Micro Devices , actually performed well in Friday trading. It's down more than 50% for the year as its profits and earnings have fallen sharply. Still, some investors realized the stock could be on sale today, and the stock jumped nearly 8% as a result.

This evening, at a 5:30 p.m. ET press conference, President Obama said about the fiscal cliff that "nobody can get 100% of what they want" and that he was "ready and willing" to reach a deal. He emphasized he thought an agreement could still be reached within the next 10 days, before the Jan. 1 deadline, encouraging Americans to relax and enjoy some eggnog.

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The article Why the Dow Plummeted 120 Points Today originally appeared on Fool.com.

John Divine has long JAN 2013 $10.00 calls on Bank of America. You can follow him on Twitter, @divinebizkid, and on Motley Fool CAPS, @TMFDivine.The Motley Fool owns shares of Bank of America, Intel, and McDonald's. Motley Fool newsletter services recommend Intel and McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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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