What's Really Pulling the Dow Down This Morning

For investors who thought last week's volatility might be nothing more than another short-lived episode in the 4-year-old bull market's inexorable climb higher, today's early market movements were disappointing. Stocks opened to substantial losses, with the Dow Jones Industrials trading down as much as 150 points in early trading. Many analysts pointed to the failure of the Japanese central bank to deliver as much economic stimulus as investors had hoped to see, demonstrating once again the markets' near-addiction to government intervention. By 10:55 a.m. EDT, the Dow had recovered much of its losses but was still down 85 points.

As important as Japan is to the global economy, what's really making U.S. investors nervous is the upward move in interest rates lately. With inflation under control, you'd expect to see bond price stability, but the Fed's extensive participation in the bond market has distorted supply and demand enough to make investors question whether current rates accurately reflect expectations for economic recovery. Until investors understand the impact of the Fed on interest rates, they'll be uncertain how its inevitable exit from bond-buying operations will affect the economy.

Whether the market keeps correcting or bounces back, it's important to focus on company-specific happenings to assess investment success. For instance, Microsoft has dropped 1.6% not just because of the overall weakness in the market but also due to concerns that a price war with gaming rival Sony could water down the positive impact of the newest-generation Xbox gaming console. Sony decided to release its PlayStation 4 at $399, undercutting the Xbox One's price by a full $100 and demonstrating the advantage that a weaker yen has had in allowing Sony to stake out more competitive price points for its products. Unless Microsoft finds a way to limit the damage, its gaming division could suffer a rare setback in what has generally been a lucrative history for the segment.

But Disney has held up better than Microsoft, sinking just 0.1%. On the video game front, the company is banking on its coming Infinity offering. Yet the company's interactive division has been a rare blemish in Disney's stable of highly profitable business segments, and the decision to outsource Star Wars-based games to ElectronicArts,rather than keep them in house, suggests that Disney doesn't feel the need to do everything on its own.

Finally, to complete the gaming trifecta, GameStop has jumped 8.5% after announcing that it's taking preorders for the PlayStation 4. For GameStop, new consoles could represent a renaissance for its business, even though game developers are taking steps to limit the ability of gamers to resell their games. Despite those challenges, GameStop has seen its stock roar upward recently, and publicity from new game consoles should get customers in the door. What the company does with those customers will tell us whether the share-price gains are justified.

It's easy to forget that Walt Disney is more than just the House of Mouse. True, Disney amusement parks around the world hosted more than 121 million guests in 2011. But from its vast catalog of characters to its monster collection of media networks, much of Disney's allure for investors lies in its diversity, and The Motley Fool's premium research report lays out the case for investing in Disney today. This report includes the opportunities and threats the company faces going forward. So don't miss out -- simply click here now to claim your copy today.

The article What's Really Pulling the Dow Down This Morning originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of GameStop, Microsoft, and Walt Disney. 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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