Topline
The U.S.’ bluechip stock index is on the cusp of suffering its longest stretch in the red since 1978, a potentially concerning signal for investors enjoying an otherwise sanguine period for stocks, though Tuesday’s losses are largely tied to a singular company—UnitedHealth Group—and gains remain healthy over a longer timeframe.
December has not been festive for the Dow.
Key Facts
The Dow Jones Industrial Average fell 350 points, or 0.8%, by mid afternoon, heading to its ninth-consecutive negative trading session, dating back to December 5.
A nine-day losing streak would be the Dow’s first since February 1978, according to FactSet, when the Dow traded at about 750 points, less than 2% of today’s more than 43,000.
The Dow is down 3.7%, or 1,650 points, during the down stretch.
Healthcare insurance stock UnitedHealth Group was the worst performer of the Dow’s 30 constituents Tuesday, falling $18, or 3.5%, to a seven-month low.
Banker Goldman Sachs and artificial intelligence dominator Nvidia were among the other stocks down at least 1.8% on Tuesday.
Surprising Fact
The Tuesday caboose role was fitting for UnitedHealth, which is by far the Dow’s worst performer during the nine-day drought, falling 21%. That’s almost twice as steep a decline as the next worst performer during the period, Nvidia at 11%, while Goldman, home improvement firms Home Depot and Sherwin-Williams and oil company Chevron are each down at least 4% during the period. UnitedHealth’s struggles trace back to the notion that the policies of President-elect Donald Trump and Robert F. Kennedy Jr., Trump’s pick for Health and Human Services secretary, will hurt the healthcare industry, and backlash tied to the fatal shooting of UnitedHealth’s insurance subsidiary’s chief executive Brian Thompson. UnitedHealth stock accounted for about 40% of the Dow’s December decline through Monday, according to CNBC.
Key Background
The Dow has tracked the performance of 30 of the most prominent American public companies across industries since 1928. Still one of the most commonly cited measures of broader equity performance, the Dow differs from most other indexes in that it is calculated based on a constituent stock’s share price, not the underlying company’s market capitalization. For example, Goldman and UnitedHealth are the two most heavily weighted components on the Dow despite being the 47th- and 17th-largest American companies, respectively. This can distort results compared to the market cap-weighted S&P 500 and Nasdaq indexes.
Contra
The Dow is still up over 18% year-to-date including reinvested dividends and trades within 4% of its all-time high set just ahead of the losing streak. The index also remains up almost 3% since Election Day. And the Dow’s 2.7% loss this month is hardly a historical rarity, as the index has had 11 worse months than that in the last three years alone.
Further Reading
