Why The Dow Tanked Today
Aug 30th 2012 6:21PM
Updated Aug 30th 2012 6:22PM
U.S. stock markets took a beating today, as the Dow Jones Industrial Average (INDEX: ^DJI) closed at its lowest point in nearly a month. On the day, the Dow shed 107 points, slightly more than 0.8%. In similar fashion, the S&P 500, and the tech-weighted Nasdaq, fell 0.8% and 1.1% respectively.
In a return to form, negative news out of Europe rattled investors, specifically from Spain, where fresh news came that the indebted Iberian sovereign plans to delay its decision on whether to seek a bailout. This comes a day before Fed Chairman Ben Bernanke is slated to give a much-anticipated speech from the Fed's annual retreat in Jackson Hole, Wyoming. A positive signal could help add fuel to the strong performances from markets over the last several months, despite a consistent spate of paltry or negative economic data that would keep more sane markets at bay.
Traders appear to expect a substantial swing in either direction tomorrow, which was reflected by a sharp rise in the market's so-called "fear gauge." or the VIX (INDEX: ^VIX) , which gained 4.5% in today's session.
Around the markets
Individual stocks also issued several compelling performances today, the most high-profile of which came from IPO fallen angel, Pandora Media (NYS: P) , whose stock spiked 14% higher, as its reported better-than-expected earnings for its most recent quarter, and raised its full-year outlook. The company, which investors had viewed with increasing skepticism, went a long way to demonstrate its advertising model is indeed sustainable.
In other news, Sears Holdings (NAS: SHLD) fell 8%, as it was announced that the bleeding consumer goods company will be dropped from the S&P 500 index after market close on September 4. Such movement often occurs when companies are either added or removed from indexes, as the collective buying and selling from index funds and ETFs can have a larger-than-realized effect on the share price. However, investors interested in the company should always base their investment thesis on something more substantial than simple index placements.
This brings me to my final point. At the Fool, we always advocate investing for the long run. Day to day, markets can send prices of companies miles away from their actual worth. That's why investors will do well to invest in companies with sustainable business models that can perform well over the long-term. The Fool recently highlighted three companies on the Dow that should easily stand the test of time. We break down their relative merits and weaknesses in our new research report, which you can grab for free today. Just click here to get started.
The article Why The Dow Tanked Today originally appeared on Fool.com.Andrew Tonner has no position in the stocks mentioned above. You can follow Andrew and all his writing on Twitter at @Andrew Tonner. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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