Two Stocks Walloping the Dow as Worldwide Markets Drop


The Dow Jones Industrial Average is basically unchanged as markets around the world drop in response to the possible slowing of the Fed's QE3 and poor data on Chinese manufacturing. As of 1:10 p.m. EDT the Dow is down 7 points, or %, to 15,300. The S&P 500 is down % to .

There were four U.S. economic releases today.





Weekly new unemployment claims

May 11 to May 18



Markit Flash PMI




FHFA Home Price Index




New-home sales




Source: MarketWatch U.S. Economic Calendar.

The U.S. economic releases are being overshadowed by fears over the Fed's possible slowing of QE3 and negative economic data out of China.

QE3 is the Federal Reserve program of buying $45 billion in long-term Treasuries and $40 billion of mortgage-backed securities each month. Yesterday, Bernanke testified before Congress' Joint Economic Committee, and while he was noncommittal, he said the Fed could begin slowing purchases at one of the next few meetings. Then, the minutes from the May 1 Federal Open Market Committee meeting showed that some members want to slow or stop purchases as soon as next month.

It remains to be seen what the Fed will do. The Fed has stated before that purchases will continue until inflation expectations go above 2.5% or unemployment drops to 6.5%. Inflation is currently just above 1%, while unemployment is at 7.5% and continues to decline.

Second, manufacturing activity in China has been slowing, and today HSBC reported that its Chinese purchasing managers index showed that manufacturing activity contracted in may: The index dropped to 49.6 in May from 50.4 in April. A reading of more than 50 indicates expansion, while a reading of less than 50 indicates contraction.

In response, both Asian markets and European markets sold off. The Nikkei finished 7.3% lower, Hong Kong's Hang Seng index finished 2.5% lower, and Europ's FTSE finished down 2%.

Today's Dow leader
Today's Dow leader is Hewlett-Packard , up 13.5% after it reported second-quarter earnings last night. The PC manufacturer reported earnings per share of $0.87 and revenue of $27.6 billion, whereas analysts had expected EPS of $0.81 and revenue of $28 billion. HP has been weighed down by a declining PC market, as well as terrible capital-allocation decisions on its part. These combined last year to send Hewlett-Packard stock down to just $11.35. But the stock has roared back this year, up 70% year to date to $24.11 after the sell-off went too far.

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Second for the Dow today is Boeing , up 1.7%. Today Chinese authorities approved Boeing's 787 Dreamliner for use in China. Approval had been a long time coming and was further delayed when the FAA grounded the craft at the start of the year due to problems with its lithium-ion battery. Before the Dreamliner was cleared for flight, Chinese airlines had ordered just 35 Dreamliners. Today's decision opens up a vast new market for Boeing's newest jet.

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Dan Dzombak can be found on Twitter @DanDzombak or on his Facebook page, DanDzombak. He has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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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