Why Are Dow Jones Stocks Down Today?

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The Dow Jones Industrial Average is one of the indices most followed by investors. As a result, when Dow Jones stocks fall 2.3% in any given day, investors take notice.

The causes of the current decline are multiple. However, it is clear that the last two sessions have been particularly brutal for investors. That’s because Friday marked the release of the highly anticipated CPI print, which came in much hotter than expected. Yet another new four-decade high was reached in May, with inflation rising 8.6%.

This higher level of inflation fueled bond yields. Over the past two sessions, Treasury yields have risen about 40 basis points. It is an extremely fast acceleration, in a very short time.

Additionally, today the 2-10 Treasury yield curve inverted for the first time since April. Typically, this yield curve inversion signals a recession on the horizon. Another reversal in such a short time increases the probability of said recession in the medium term. For Dow Jones stocks, and stocks at all levels, this is not a good thing.

Why Dow Jones Stocks Matter to Investors

A big part of the reason so much attention is paid to the Dow Jones index is the size and quality of the companies held in this index. Intended to represent consumer-oriented, mega-cap US industrial companies, these Dow Jones stocks provide a pretty solid reading of the health of the US economy. Companies such as Apple (NASDAQ:AAPL), Coca Cola (NYSE:KO) and walmart (NYSE:WMT) are three examples of the type of blue chip stocks held in this index.

When the index is on a tear, so is the economy (usually).

However, this recent slowdown, driven by strong macroeconomic headwinds, hurt even the highest quality stocks in the market. Valuations are down across the board. Indeed, it is not only unprofitable and speculative names that are affected by these rising rates. This is shaping up to be a tough time for investors, as defensive stocks come under heavy selling pressure alongside the broader market.

As of the date of publication, Chris MacDonald had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

Chris MacDonald’s love of investing has led him to pursue an MBA in finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative long-term investment outlook.

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