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These 3 Stocks Punished the Dow Friday

The Motley Fool
The Motley Fool
 2021-11-26
  • Markets fell sharply on Friday.
  • Three Dow stocks in particular were responsible for a big portion of the overall decline.
  • It's best not to shift from your long-term investing strategy.

The stock market was definitely not in a holiday mood on the day after Thanksgiving, as news of the new Omicron variant of COVID-19 led to widespread concerns about a possible return to lockdown conditions. By the end of the day, the Dow Jones Industrial Average (DJINDICES:^DJI), S&P 500 (SNPINDEX:^GSPC), and Nasdaq Composite (NASDAQINDEX:^IXIC) were all down between 2% and 3%.

Today's news hurt stocks in many different sectors of the market, with a wide variety of factors playing into losses. Because of the Dow's price-weighted nature, a few stocks had a disproportionate influence on the average's moves. Below, we'll look at how American Express (NYSE:AXP), Boeing (NYSE:BA), and Goldman Sachs (NYSE:GS) combined to lop about 250 points off the Dow by themselves.

A double hit for American Express

American Express was the worst performer in the Dow, falling almost 9%. The financial company saw its stock fall for two different reasons related to the news about the pandemic.

First and foremost, American Express has historically relied on global travel to drive a substantial part of its business. Its traveler's checks are known around the world as a means of doing business, and its charge cards have prestige in key market destinations. The prospects for further restrictions on travel, therefore, would have a detrimental impact on its business.

Moreover, as a financial institution, American Express benefits from a steeper yield curve. The recent trend in that direction met an abrupt reversal on Friday, as bond yields plunged on prospects for a possible economic slowdown. Investors anticipate that the company could have problems meeting its own expectations if the pandemic worsens, and that's why the stock cost the Dow about 100 points on Friday.

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Image source: Getty Images.

Flying lower

Another company that one would've expected to fare poorly given the news was Boeing (NYSE:BA). The aerospace company fell more than 5%, and its higher-priced shares gave it a big impact on the Dow.

You won't find airline stocks in the Dow Industrials, but they took even larger hits as a result of the COVID news. Already, the U.S. and other nations have put travel restrictions on South Africa and neighboring countries to try to stem the spread of the Omicron variant. That bodes poorly for airlines serving those markets, and it indirectly affects Boeing by raising the possibility that airlines will have to cancel or postpone orders if they come under additional economic pressure.

Boeing has suffered substantial losses, but investors were starting to hope that it would turn profitable again in 2022. The latest news threatens that assessment, and investors don't like the prospects for more red ink from the aircraft manufacturer.

Banking on rate rises

Goldman Sachs was down 2.5% on Friday. Its nearly $10 decline cost the Dow roughly 70 points on the day.

Goldman faced some of the same challenges that American Express does. Increasingly, Goldman has tried to boost its retail banking presence through its Marcus unit, and that has exposed the Wall Street financial giant to greater interest rate sensitivity. The flattening yield curve Friday didn't do any favors to the company's consumer banking segment.

Wall Street has also benefited from huge levels of investment banking activity, where Goldman excels. If a market pullback leads to reduced activity for initial public offerings, acquisitions, and other corporate events, then it could hurt that part of Goldman's business as well.

Don't panic

A 900-point plunge for the Dow makes for a scary headline, but it's just part of the natural volatility of the stock market. Don't lose perspective, and if you stick with your long-term investment strategy, things will likely go better for you than if you panic.

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