5 Stocks That Fell For No Legitimate Reasons

Includes: CAT, IBM, JPM, MMM, UTX
by: Brian Nichols

There was only one stock in the Dow Jones that traded with gains on Thursday, and one more that broke even. There were 28 total stocks that traded with a loss on Thursday as the Dow Jones lost nearly 120 points. Below are five stocks that accounted for nearly half of the total 120 point loss. These stocks are a critical part of the Dow Jones, as each account for a significant value of the index. When these five stocks lose value it is most likely the Dow is trading down. Therefore I will look at what made these stocks trend down to see if the loss is validated by a legitimate reason or if the loss is related to panic within the markets.

Caterpillar (NYSE:CAT) lost 2.69% of its value and now trades with a market cap of $57.21 billion. The stock accounted for 18.54 points of the Dow Jones loss with no significant company news to experience a loss. The stock trades in the construction and agriculture machinery sector as the company is engaged in the manufacturing of construction and mining equipment.

The only reason for CAT to experience such a loss on Thursday is because of bad reports from both manufacturing and construction, which are two areas that directly affect the company. Construction spending for August fell 1.3% as public construction outlays reached its lowest level since December 2006. A U.S. manufacturing report showed that factory work dropped 0.3 in August from July to its lowest level since July 2009. Manufacturing which is crucial to the economy is now getting closer to the critical level of 50, which could mean we are not producing goods at an acceptable rate. I believe these two reports had an impact on the stock as it was trading near even until mid-day, then began trending lower. The stock appeared to balance itself, at its current level, during the last two hours of trading but has slipped lower in after hours. The loss in after hours could indicate the market is preparing for another loss on Friday. If construction and manufacturing both continue to decline it could have an impact on CAT and its earnings, which could cause the stock to drop lower.

International Business Machines Corp. (NYSE:IBM) lost 0.92% of its value and is trading with a market cap of $203.42 billion. The stock accounted for 11.96 points of the Dow Jones loss with no significant company news, other than acquiring another company which sometimes has negative effects on a stock short term. I do not believe there was any relevant news for the stock to drop. The manufacturing data may have had a slight impact on the stock but I anticipate the loss to be more speculation-based as the markets prepare for bad news regarding job reports on Friday.

3M Company (NYSE:MMM) lost 1.65% of its value and is now trading with a market cap of $57.91 billion. The stock accounted for 10.37 points of the Dow Jones loss with no developments or company news to affect the stock. I believe the stock performance was probably a reaction to the data and that the company's reaction was similar to that of CAT. The company is part of the construction supplies and fixtures industry; therefore negative information regarding manufacturing or construction could affect the stock. Yet revenue has continued to increase for this company along with it being on pace to significantly outperform 2010. I believe this is a company that is growing not stalling and will be instrumental in our economies uptrend because of the excitement surrounding the company and its long term growth potential.

JPMorgan Chase & Co. (NYSE:JPM) lost 3.35% of its value and is now trading with a market cap of $141.54 billion. The stock accounted for 9.54 points of the Dow Jones loss with no significant developments from the company. The financial sector experienced a great deal of loss on Thursday after Goldman Sachs was ordered to review foreclosure practices with reasons to believe a pattern of misconduct and negligence was present. JPM just happened to hold the biggest piece of the Dow Jones pie that affects the index more than other banks. Most of the large banks in America experienced the same level of loss as JPM as investors fear that regulatory moves could be brought against other banks. This stock along with several other financial stocks dragged the market down on Thursday regardless of the fact that the Goldman Sachs situation has nothing to do with any other bank, at this time.

United Technologies Corporation (NYSE:UTX) lost 1.62% of its value and is now trading with a market cap of $66.38 billion. The stock accounted for 9.08 points of the Dow Jones loss with no company developments to push the stock lower. The company operates in the capital goods sector or the aerospace and defense industry, with manufacturing a large part of company operations. Therefore the manufacturing numbers that were released may have had some effect on the stock. The company is in a similar financial situation as CAT and MMM; it's on pace to produce higher revenue and income in comparison to year-over-year. The information released on the monthly reports are solid but do not confirm individual company performance therefore I will trust UTX guidance for revenue which was increased for the full year.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.