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The DJIA today plunged 292 points. The Nasdaq suffered its steepest one-day decline in almost a year.
What happened? A wide sell-off in the biotech and technology sectors outpaced gains fueled by news of a merger between Kraft Foods Group Inc. (Nasdaq: KRFT) and H.J. Heinz Co.
Dow: 17,718.54, -292.60, -1.62%
S&P 500: 2,061.05, -30.45, -1.46%
Nasdaq: 4,876.52, -118.21, -2.37%
The S&P 500 Volatility Index (VIX), the market's fear gauge, surged 13.88% on the day.
What Moved the DJIA Today: The markets are still jittery about pending monetary policy from the Federal Reserve at a time that concerns are emerging over second-quarter earnings season thanks to a stronger dollar and weakening economic data. Stocks with high earnings multiples like biotech and semiconductor stocks took a hit this afternoon. This morning, the February durable goods orders report registered much lower than expected, signaling that American businesses are not investing as much as needed to grow the economy.
Weakness in the U.S. dollar, geopolitical tensions in Yemen, and news of speculative buying outweighed oversupply concerns in the oil markets. This morning, the Energy Information Administration (EIA) announced that U.S. crude inventories increased by another 8.2 million barrels in the week to Friday, the highest level in 80 years.
Now, check out the other top market stories – plus get our new profit tip for investors:
- Merger Mania: Before the bell today, a mega-deal hit the North American food and beverage industry. Shares of Kraft Foods Group jumped roughly 35% to hit an all-time high on news that the company will merge with H.J. Heinz Co. The merger will create a new publicly traded company called The Kraft Heinz Group. The deal is financed with a $10 billion investment by Brazilian private equity giant 3G Capital Partners LP and Warren Buffett's Berkshire Hathaway Inc.(NYSE: A). Snacks giant Mondelez International Inc. (Nasdaq: MDLZ), a company that split from Kraft in 2012, gained 2.3% on news of the deal.
- Getting Social: Shares of social media giant Facebook Inc. (Nasdaq: FB) slipped 2.8% as the company kicked off a two-day event for developers. The company unveiled a slew of new features today and will allow developers to create apps that function inside Facebook Messenger. In the next few days, the company will allow at least 40 new applications within the Messaging service, some of which will allow users to send animations, videos, and new content. For a breakdown of three game-changing events we expect to happen during the conference, get our full coverage of Facebook's development conference.
- Semiconductor Slump: Shares of the iShares PHLX Semiconductor ETF (Nasdaq: SOXX) slipped 4.65% and is now trading below its 50-day moving average. Notable sector leaders were also down sharply. NXP Semiconductors NV (Nasdaq: NXPI) fell 3.7%. Texas Instruments Inc. (Nasdaq: TXN) and Analog Devices Inc. (Nasdaq: ADI) both shed 4.64%.
- Tech Weakness: Shares of International Business Machines Corp. (NYSE: IBM) fell another 2.3% as the tech giant continues to experience increasing weakness in its stock price. Today's decline was fueled by a reaffirmation of a "Sell" rating by a notable analyst at Credit Suisse (NYSE ADR: CS). In a research note, the analyst projected the company is facing "a painful multiyear transition." The rating was noted in the firm's report "32 Contrarian Stock Ideas."
- Apple a Day:Apple stock fell 2.6% this afternoon. Shares of Apple Inc. (Nasdaq: AAPL) were likely reacting to the broader sell-off in the tech markets, although some analysts have suggested that rival Facebook's plans to turn its Messaging service into a platform could be rattling investors. Apple continues to see a surge in new competition. This is the latest attack on its products and services. Just last week, Google Inc. (Nasdaq: GOOG, GOOGL) and Intel Corp. (Nasdaq: INTC) announced plans to team up with Tag Heuer to create their own smartwatch to compete against the new Apple Watch.
Money Morning Tip of the Day: Don't panic when markets are down. Look for profit opportunities instead using these strategies.
The Dow Jones fell nearly 300 points today, and the Nasdaq shed 118 points – its biggest decline since April 2014.
People get nervous when markets plunge, but stock market downturns are just a fact of investing. They're very rarely anything more than a short-term adjustment.
Rather than dwell on short-term losses, investors should be on the hunt for opportunities. Here are three of the best ways to profit when markets are down.
No. 1. Buy Stocks on Sale: This is the most obvious way to take advantage of a market downturn. Maintain a wish list of stocks you'd like to buy if they were just a little cheaper. A market downturn is the perfect chance to use such a list.
No. 2. Sell Stocks Short: In short selling, you borrow shares from your broker and sell them at the current market price. The idea is to profit by buying the shares back at a lower price once the stock drops. If all goes well, you return the shares to the broker and keep the difference as profit (minus a small margin fee). Learn more on how to short stocks here.
No. 3. Profit When an Index Falls: A reverse index fund rises when the market falls and falls when the market rises. It's essentially a hedge against any downturn. Options include the Rydex Inverse S&P 500 Strategy Fund (MUTF: RYURX), which tracks the S&P 500 and rises 1% for every 1% the index falls, and the ProShares Short Dow30 ETF (NYSE Arca: DOG), which tracks the Dow Jones.
Finally, prepare your portfolio ahead of any market downturns by using trailing stops. This tool limits losses, be they from a single lousy earnings report from a company or a stock market crash.
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About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.