How Italy's Election Dragged on Stock Markets Today


With little economic news hitting Wall Street today, the markets looked overseas for inspiration -- and they did not like what they saw. Elections are taking place in Italy, and it looks like the country's austerity agenda may be in question and a clear leader won't emerge this time around. Italy is still running a large deficit that threatens its standing as a member of the European Union and, by extension, Italy's euro-denominated debt. The uncertainty has the Dow Jones Industrial Average falling 0.63% in late trading, while the S&P 500 has fallen 0.85%.

It's no surprise that Bank of America and JPMorgan are two of the biggest decliners in today's trading session, falling 2.7% and 1.3%, respectively. Banks as large as these two have exposure to Europe in one way or another, and if Italy falls apart or the euro breaks up, there would be broad consequences across the financial industry. Right now the uncertainty is enough to push stocks lower, but it may be months before we know the true fallout of this election.

Also moving lower today is Caterpillar, which has lost 1.6% of its value today. Again, uncertainty in Italy casts doubt on all of Europe, which is still a big customer for Caterpillar, so more European turmoil would hurt demand as it did during the financial crisis. I would be less concerned about Caterpillar than a bank stock, given today's news, so if you're looking to get in, this is a good buying opportunity.

When the economy comes into question, there's one stock investors love to buy: McDonald's . The stock is one of just six Dow components moving higher today, and its 1.6% gain leads all others. It probably didn't hurt that Academy Award winner Jennifer Lawrence gave the company a shout-out on the red carpet last night, giving the company some free advertising at the award show.

After making investors rich in 2011, McDonald's has been one of the worst-performing blue-chip stocks of 2012. Our top analyst on the company will tell you whether you should be worried by this trend, and he'll shed light on whether McDonald's is a buy at today's prices. Click here now to read our premium research report on the company.

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Fool contributor Travis Hoium has no position in any stocks mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw. The Motley Fool recommends McDonald's. The Motley Fool owns shares of Bank of America, JPMorgan Chase & Co., and McDonald's. 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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