Black Eye for the Blue Chips

Editor's note: Jon D. Markman writes a weekly column for CNBC on MSN Money that is republished here on TheStreet.com. He's also a regular contributor to RealMoney, TheStreet.com's subscription site. If you'd like to see all of Jon Markman's RealMoney commentary, click here for information about a free trial.

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How now, cowed Dow?

For the first time since the start of the bear market in 2000, the Dow Jones Industrial Average is the worst-performing and most scandalized major market proxy over a calendar-year period.

And its 5% decline so far in 2004 -- capped by a 100-point slide last week when insurance giant American International Group (AIG - commentary - Cramer's Take) was accused of bid-rigging -- has left it straggling behind the S&P 500, down 0.5%; the Nasdaq 100, down 2.5%; and even the Nasdaq Composite, down 3.1%. The Amex Composite, which is loaded with oil companies, is up 10%.

It's not just AIG. This stunning state of affairs has resulted from months of intense attacks on several of the world's largest companies for failures financial, strategic and moral. Where two years ago fans of the very large companies that comprise the Dow Jones Industrials could lord their superiority over the brash upstarts at the S&P and Nasdaq, they have now been forced to face up to a woeful record of long-ignored shortcomings. The Dow is suddenly a lion in winter.

Cut Down in Broad Daylight

The humbling of the mega-cap index is not trivial. It is emblematic of an economy that has lost its leadership. Imagine an army with no generals or a major-league team without a coach.

It was one thing when billions of dollars were lost as overvalued Internet stocks slammed the Nasdaq Composite four years ago; it was easy to say that an unknowledgeable class of retail investors got what was coming to them. But it is quite another when stocks in the mainstream of American life -- brand names all -- are cut down in broad daylight because of their own mistakes.

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Jon D. Markman is publisher of StockTactics Advisor, an independent weekly investment newsletter, as well as senior strategist and portfolio manager at Pinnacle Investment Advisors. At the time of publication, he held positions in the following stocks mentioned: Expeditors International, Yellow Roadway, ExxonMobil and Coca-Cola. While he cannot provide personalized investment advice or recommendations, he welcomes column critiques and comments at [e-mail]; please write COMMENT in the subject line.