As expected, the Dow Jones Industrial Average opened down and moved more than more 300 points lower — about a 2.67% loss, to under 11,140 — after Friday’s U.S. credit downgrade by Standard & Poor’s. For the last five days of trading, the Dow Jones Industrial Average is down more than 7.5%. For 2011, the Dow Jones Average is down more than 3.3%.
Treasury Secretary Tim Geithner announced he would be staying until after the 2012 elections. The markets reacted accordingly. A Sunday night meeting among the European Central’s Bank’s governing council and talk of more quantitative easing by the Federal Reserve did nothing to restore investor faith in the financial markets or global economic leadership.
Bank of America (NYSE:BAC) continued as the worst stock on the Dow for 2011, down more than 9% to under $7.50, a loss of more than 70 cents per share. AIG is now suing Bank of America for $10 billion for “massive fraud” on mortgage debt, as reported this morning. Poor earnings for the second quarter also have hurt Bank of America, and looming losses from its acquisition of Countrywide Credit in 2008 and Basel III requirements mean Bank of America must develop a $50 billion cash cushion. Bank of America is down more than 25% for the month.
JP Morgan (NYSE:JPM) was down more than a $1, about 4%, to under $36.20 as the entire financial sector was downgraded recently. For 2011, the financial sector has been the worst-performing group on the Dow. JP Morgan is down about 8% for the week and 10% for the month. JP Morgan now has a relative strength rating of 26, with 30 the standard for a stock being viewed as oversold.
Continuing to plow under from the opening was Caterpillar (NYSE:CAT), down more than $4, about 5%, to below about $86. A recent analyst recommendation had the stock trading at $135, but investor fears of slowing growth have been taking the stock lower. Caterpillar is now down about 20% for the month, and it has a relative strength index rating of 26.79.
After recently announcing massive layoffs of 13,000 because of business conditions and after being served with a subpoena this morning for its marketing of three drugs, Merck (NYSE:MRK) shed about a $1 share, around a 3% drop, to trade around $31.50. Merck is down for the week, the month and the quarter, along with selling below its 20-, 50- and 200-day moving averages. With a relative strength index rating of 19.21, Merck is beneath the 30 standard for when a stock is considered oversold.
Concerns about global economic growth had General Electric (NYSE:GE) down about 80 cents, almost 5%, to below $15.50 in early morning action. A Warren Buffett favorite, GE announced this morning that it was adding tech jobs, but the stock still is down about 15% for the month.
Coca-Cola (NYSE:KO) was up early but fell into negative territory with about a 1% drop to under $66.20, losing more than 60 cents a share. Coca-Cola recently posed second-quarter earnings and is viewed as a safety holding. Another Buffett favorite, Coca-Cola is up for the quarter and down slightly for the month. Sales quarter-to-quarter have increased almost 50% for Coca-Cola.
Procter & Gamble (NYSE:PG) was the only Dow stock to hold onto its gains by mid-morning, up about 30 cents, picking up about 0.5% a share to over $61, as it announced profit increases of 15% thanks to growth from overseas revenues. Procter & Gamble is up 4% for the year but down about 6% for the month. It is only 9% below its high for the year.
Jonathan Yates does not own any of the stocks mentioned in this article.
