Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Hewlett-Packard Company (HPQ), Bank of America Corp (BAC): The Dow’s Plunge Isn’t About China

Every morning, you’ll find plenty of handy explanations from mainstream financial media talking about the issue of the day and somehow linking it to the short-term movements of the market. This morning, China’s central bank was the scapegoat du jour, even though the crisis actually began last week and was largely ignored at the time. After suffering big declines last week, the Dow Jones Industrials started off the week on the same note, plunging 173 points by 10:50 a.m. EDT.

Hewlett-Packard Company (NYSE:HPQ)

But the bigger driver of the stock market’s recent decline is the strength of its previous advance. Indeed, much of the selling pressure is coming from stocks that were among the biggest gainers during the bull market run. For instance, Hewlett-Packard Company (NYSE:HPQ) is down 3.2% this morning, but nothing fundamental has changed in HP’s turnaround. The plan CEO Meg Whitman has laid out will take years to execute, making single-day volatility a function of traders looking for short-term angles, rather than a meaningful change to its underlying business. Much more reasonable is the argument that the stock’s huge upward move in recent months was overblown and that a pullback merely moderates what has been great performance for shareholders.

Similarly, Bank of America Corp (NYSE:BAC) is down about 2.5% despite having taken steps to give the Federal Reserve a plan on how to respond to a potential future financial crisis. The so-called “living wills” for banks like B of A list possible steps that they could take if a shock to the global financial system led to capital problems. To the extent that these documents keep regulators from imposing stricter guidelines, they’re positive for B of A. Yet again, after having doubled last year, Bank of America Corp (NYSE:BAC)’s stock has arguably gotten ahead of itself.

Finally, beyond the Dow, the real damage is happening not in stocks but in other markets, especially bonds. PIMCO Total Return ETF is down 1.3%, proving to investors seeking safety that bond investments are far from a secure place to put your money these days. Emerging-market bond investments are taking even more damage, with iShares JPMorgan USD Emerging Markets Bond plunging 3.5%. When investors try to reduce their risk, the first place they look is in the more aggressive areas where they’ve put their money. The exodus from emerging markets in both stocks and bonds shows the fear that’s rising among U.S. investors — but that fear is motivated less by the prospects in those countries than by investors’ desire to preserve hard-won profits dating back to 2009.

The article The Dow’s Plunge Isn’t About China originally appeared on and is written by Dan Caplinger.

Fool contributor Dan Caplinger owns warrants on Bank of America. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Bank of America. The Motley Fool owns shares of Bank of America.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!