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Something strange is happening on the American markets right now. If you thought that the American stock market had been on a tear of late, you’d only be half-right. Sure, both the S&P 500 Index (SP: .INX) and the Nasdaq Composite Index (NASDAQ: .IXIC) are inches away from their current all-time highs, which have been reset yet again this month. But things have been less rosy for the Dow Jones Industrial Average (DJX: .DJI).
Here on the ASX, we have two flagship indexes – the S&P/ASX 200 Index (ASX: XJO) and the All Ordinaries Index (ASX: XAO). Both of these indexes are relatively simple. The ASX 200 represents the largest 200 stocks listed on the Australian stock market. The All Ords expands this scope to around 500 of the ASX’s largest shares.
But things aren’t so simple Stateside.
How are the US markets measured?
The US markets have more indexes than you can poke a stock at.
The S&P 500 is probably the most prominent American index. It represents the performance of the largest 500 public American companies.
However, the Nasdaq and the Dow are also flagship American indexes. The Nasdaq is a stock exchange in its own right, complementing the traditional New York Stock Exchange. The Nasdaq Composite is an index that tracks the stocks, including tech giants like Apple and Amazon, that call the Nasdaq home.
The Dow Jones is an interesting case, though. It’s one of the oldest indexes in the world and only has 30 members at any one time. These 30 stocks are selected to make the Dow as representative of the broader US stock market as possible.
This index traditionally held ‘industrial’ stocks like General Motors, Ford, and General Electric. But these days, the Dow includes companies such as American Express, McDonald’s, Amazon, IBM, Procter & Gamble, and Walmart.
Interestingly, the Dow Jones is price-weighted, rather than the usual market capitalisation-weighting we see most indexes use these days.
What’s going on with the Dow Jones this December?
Last night, the Dow closed 0.61% lower at 43,449.9 points. Now, you might think that isn’t too special. However, this loss marks the ninth straight down day for the Dow Jones in a row. And that is quite special indeed.
As reported by CNBC, this is the first time since 1978 that the Dow has dropped for nine trading days in a row. Yep, a 46-year record has just been broken. A record that stood through the 1987 crash, the dot-com crash, the great financial crisis of 2007-2008, and the 2020 COVID crash.
And, considering the heights that the other major US indexes have been scaling in recent days, it is quite strange timing.
CNBC had this to say on why this Dow Jones losing streak is happening:
Driving the Dow’s losses has been a rotation into technology stocks and out of some of the more old-economy stocks that gained in November following the reelection of Donald Trump. Those stocks dominate the Dow, rather than tech.
This is true. Out of the largest five Dow Jones stocks, only one – Microsoft – is a tech company. The other four include Goldman Sachs, UnitedHealth Group, Home Depot and Caterpillar.
That stands in stark contrast to the S&P 500 and the Nasdaq Composite, which are both dominated by the ‘magnificent seven’ tech stocks.
Let’s see if this Dow Jones losing streak hits double-digits tomorrow morning.
