Uncertainty Has Again Killed the Rally
Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
After three straight weeks in which all the major U.S. indexes moved higher, uncertainty about what Congress may do about the possible government shutdown and debt ceiling caused the rally to come to an end today. After closing down 70 points, or 0.46% today, the Dow Jones Industrial Average capped a week in which it lost 192 points, or 1.24%. The blue chip index now sits at 15,258, after entering the week at 15,451.
The other two major indexes also closed lower today, as the S&P 500 lost 0.41%, and the Nasdaq fell 0.15%, but only the S&P is down for the week -- 1.06% -- while the Nasdaq ended higher by 0.18%. Now, let's take a look at a few reasons the Dow ended the session lower.
A few Dow losers
Shares of McDonald's dropped 1.09% today as investors take in the idea of their company offering fruit and vegetables -- besides the regular fries -- with its burgers and sandwiches. As my colleague Michael Lewis recently explained, the move comes as a way to offer its customers a healthier option, but it may end up hurting shareholders in the long run. The traditional fries and "unhealthy" options are cheap for the company, and allow it to keep margins high. But, fruits and vegetables, well, those are more expensive and will hurt margins and, in turn, profits.
Two of the Dow's other big downers today were Intel and Cisco , falling 1.84% and 1.85% respectively. Intel's move lower can partially be explained by the announcement that the company is looking for a partner for its planned Web-based TV service. Insiders have stated that the service was planned to begin by the end of this year, but that's not likely going to happen, as new CEO Brian M. Krzanich has focused the company's attention more toward mobile chips, not the TV service. With all the complaints consumers have with the current TV model, and changes occurring within the industry from the likes of Netflix and Hulu, this could have been a great opportunity for Intel, but now it seems that it may not actually happen.
As for Cisco, it's likely that investors were still reacting to comments made earlier in the week by the company's CEO, John Chambers. John didn't paint a picture of massive growth for the company in the short term. Chambers said that China continues to be challenging and, although Europe is better than many have anticipated, the U.S. is the company's current growth engine. While it's great he has strong feelings about what's happening here at home, I wouldn't say that "growth engine" is pushing out a lot of horse power at this time, as the U.S.'s second quarter GDP was only 2.5%.
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The article Uncertainty Has Again Killed the Rally originally appeared on Fool.com.Fool contributor Matt Thalman owns shares of Intel. Check back Monday through Friday as Matt explains what caused the Dow's winners and losers of the day, and every Saturday for a weekly recap. Follow Matt on Twitter @mthalman5513. The Motley Fool recommends Cisco Systems, Intel, McDonald's, and Netflix. The Motley Fool owns shares of Intel, McDonald's, and Netflix. 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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