Dow Jones Industrials: Two Days, Two 100 Point Drops

As the Wonder Pets might say: “This is sewious.”

Getty Images

The Dow Jones Industrial Average fell 116.81 points, or 0.7%, to 17,055.87 today, its second consecutive drop of 100 or more points. The last time the Dow dropped 100 points or more for two consecutive days was in June.

The S&P 500, meanwhile, declined 0.6% to 1,982.77, while the Nasdaq Composite dipped 0.4% to 4,508.69. The small-company Russell 2000 once again suffered the most, having dropped 0.9% to 1,118.72.

Don’t blame the U.S. for today’s decline. An index of home prices rose 0.1% in July and us now just 6.4% below their April 2007 high, while the Markit flash purchasing managers index stayed at 57.9, a 52-month high. If only the same could be said Europe, where the PMI fell to 52.3 in August. The folks at Bespoke Investment Group consider the data:

PMIs were mixed, with beats in French Manufacturing and German Services, but bad misses vice-versa. On a Eurozone basis, both Manufacturing and Services PMIs missed, although narrowly. In short, this report muddied the waters and was neither good news for the economy in Europe nor terrible news that might prompt further policy support from fiscal authorities. European equities are reacting accordingly, a buyer's strike under way from almost the first trades.

ISI Group’s Dennis DeBusschere thinks the risks are rising:

All of this comes back to an argument we have been making for some time. With the S&P fully valued, the Fed clearly signaling its intention to raise rates in 2015, though likely earlier than many would like, ECB QE still just an expectation, equity returns should follow the path of earnings growth. With the slowing in leading indicators, the risk of a market decline is rising. Again, our base case is a mildly stronger market into the end of the year, but the risk / reward spread is clearly worsening.

And just before Rosh Hoshanah too.