How Long Will Europe Hold Back the Dow?

After a brief respite yesterday, Europe is back at the center of attention for stock market investors today. The ongoing banking crisis in Cyprus and the inability of Italian leaders to form a coalition government following its recent elections are weighing heavily on the eurozone. That pessimism spilled over into U.S. markets today, and the Dow Jones Industrials fell from yesterday's record high. A slight decline in pending home sales, though expected, didn't help the dour mood, and by 10:50 a.m. EDT the Dow was down 50 points, or 0.35%. Yet with European markets having fallen more dramatically, it's far from clear that Europe is truly holding the Dow back at all, especially given the tendency among U.S. investors to focus on domestic economic strength recently.

Among losing stocks in the Dow, Boeing has fallen 1.2% on speculation that regulators may temporarily disallow airlines to fly its 787 Dreamliner on long-distance routes. Although Boeing's stock soared yesterday after a successful test flight raised hopes that its proposed fix to its battery-overheating woes would allow carriers to start flying the aircraft again, any limitation on operating time would dramatically reduce the usefulness of the aircraft for airlines, which have counted on the Dreamliner as a more efficient option for transoceanic flights.

JPMorgan Chase is down 1.8% on reports that prosecutors in the Bernie Madoff Ponzi-scheme fraud case are looking into whether the bank followed the law in telling regulators and other authorities about Madoff-related transactions. JPMorgan has had to deal with several investigations lately, and adding one more to the list only worsens the reputational damage the bank has taken in recent years, despite the strong performance of its shares.

Finally, outside the Dow, beleaguered iron-ore and coal company Cliffs Natural has fallen more than 13% following another analyst downgrade, this time from Morgan Stanley. The analyst firm jumped on the dog pile with its own predictions that low iron-ore prices will weigh on Cliffs, which has already disappointed investors by slashing its dividend and making a dilutive secondary equity offering last month. Until global economic conditions improve, Cliffs will have trouble finding a bottom.

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