The Dow Jones Industrial Average Is Down and It’s IBM’s Fault - Barron's

IBM Photograph by Ethan Miller/Getty Images

11:56 a.m. The stock market has given back much of its early gains, but the Dow Jones Industrial Average has actually turned negative. And that’s because it has one problem that the S&P 500 and Nasdaq Composite don’t have: IBM.

The Dow has fallen 8.48 points to 26,993.50, while the S&P 500 has gained 0.2% to 2,996.79, and the Nasdaq Composite has advanced 0.2% to 8.138.01

Why the difference in returns? The S&P 500 and Nasdaq Composite, as many of you know, are market-cap weighted indexes. The biggest stocks by their value in the market—think Apple (AAPL) and Microsoft (MSFT)—get the biggest positions in the indexes. The Dow Jones Industrial Average is price weighted. that means the stocks with the highest price have the biggest weights. So moves in Microsoft, which was last trading at $139.25, has less impact on the indexes than Boeing (BA), which was trading at $370.89.

This quirk in index construction means that IBM, which has a market cap of just under $170 billion has a big impact on the index due to its $100+ price tag. With IBM stock down 5.7% at $133.97 following the release of its earnings, it is responsible for subtracting 52.04 points from the Dow. Add them back, and the Dow would be up just over 40 points.

That’s not a big gain, but at least it’s a gain.

Write to Ben Levisohn at Ben.Levisohn@barrons.com

Let's block ads! (Why?)

Business - Latest - Google News
October 17, 2019 at 11:11PM
https://ift.tt/33GNhrj

The Dow Jones Industrial Average Is Down and It’s IBM’s Fault - Barron's
Business - Latest - Google News
https://ift.tt/2Rx7A4Y

Bagikan Berita Ini