International Fears and More Speculation Drag Dow Lower


After a few days of no real news earlier in the week, the markets seem to be using up all their stored energy. With the Dow Jones Industrial Average losing 80 points yesterday after spiking in earlier trading, the downward trend continues today. Down 49 points just after 11 a.m. EDT, the index is suffering from more speculation and discouraging international activity.

Outside the U.S.
The Asian markets fell overnight, with the Japanese Nikkei dropping 7.3% by the time the markets closed. With weak manufacturing data from China and increased bond yields in Japan, the pressure on the markets was too great. European markets followed suit, though losses were not as severe. Both the unexpected contraction in China and the eurozone are unsettling to U.S. investors.

Closer to home
With yesterday's ambiguous testimony from Fed Chairman Ben Bernanke on the future of the stimulus program, there is continued speculation that the current policy may be tapered back as soon as next month -- which is helping to send the markets lower this morning. Though Bernanke said that there would be no changes and that the policy would be adjusted as needed, yesterday's release of the latest FOMC meeting minutes showed clear division among members, with some calling for the bond buybacks to be cut soon.

One of the clear statements made by Bernanke is creating some added concern this morning. Since the stimulus program is directed at supporting job growth, Bernanke said that improvements in the labor market would largely drive the decision to begin paring down the program. With this morning's unemployment report showing continued declines in new jobless claims, there is concern that this is the sign the policymakers have been waiting for.

Inside the Dow
Banks with large international components have been hit hard this morning, with both JPMorgan and Bank of America dropping in early trading. As of this writing, the losses are 0.63% for JPM and 0.49% for BAC -- though both have recovered slightly from larger drops within the first hour of trading. Outside the Dow, Citigroup has also dropped 1.77%. Since it is more focused on international operations than its peers, the bigger drop is to be expected. Although all three banks have operations in Asia that may be suffering from slower economies, operations in other emerging markets have often offset the Asian markets' weakness.

Helping limit the Dow's losses this morning is Hewlett-Packard . The tech company is soaring after better-than-expected earnings prove that CEO Meg Whitman is heading the company in the right direction. Up 13.3% so far in trading, HP is enjoying the boost from investors' added confidence, despite continued drops in important operating segments. Though revenue was a solid 10% lower than last year, the company produced $0.87 per share in earnings, beating both its guidance of $0.80 to $0.82 and analyst estimates, which fell within that range. Personal systems, which is the company's most important segment, is also the worst-performing -- with a 20% decline in revenues from the previous year. In order to keep shareholders happy with the current turnaround plan, Whitman asked for patience as the company continues to improve its balance sheet. As a reward for that patience, HP raised its dividend for shareholders by 10%.

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