Dow, Apple and Tesla are very different today


The Dow welcomes three new components: Honeywell (SHE), Salesforce (CRM) and Amgen (AMGN). And that’s saying goodbye to ExxonMobil (XOM), Pfizer (PFE) and Raytheon (RTN). Don’t worry, the Dow is not going to suddenly rise or fall (well … not because of the new stocks, anyway). S&P Dow Indices, which oversees the Dow Jones, changed the divisor used to generate the index total.

Yet the changes in the Dow (UNDUE) are noteworthy because the index has lagged the stock market as a whole – seriously. Many investors see the Dow as synonymous with the market, but it’s just 30 hand-picked stocks that don’t always do a great job of describing stock performance.

The much larger S&P 500 is up 8.6% this year. The Dow Jones rose only 0.4% and is still below its all-time high in February (the S&P 500 and the Nasdaq are currently at record levels).

Continuing the trend, the Dow Jones fell 200 points on Monday, or 0.7%. The S&P 500 was only down 0.1% and the Nasdaq was up 0.4%.

One of the main factors in the Dow’s stumbles in 2020 is the lack of tech stocks. The most important – and therefore the most weighted – stocks in the S&P 500 are Apple, Microsoft (MSFT), Amazone (AMZN), Alphabet (GOOGL) and Facebook (FB). Of these, the Dow only includes Apple and Microsoft. That means he missed out on the electrifying gains of these companies – most notably Amazon, which has climbed more than 80% this year.

By adding Salesforce, the Dow is bringing another tech company into the fold. But Salesforce is puny compared to the major tech companies. Salesforce has been on a tear recently, and it was brought in in particular to help the Dow weather the effect of Apple’s stock split on Monday (more on that in a second).

But that’s not enough to compensate: Apple’s huge gains this year have helped add more than 1,400 points to the Dow Jones, analysts at Bespoke Investment Group said in a recent research note. The stock split means the company’s weighting will drop from 12.1% to just under 3%, which means the Dow Jones is poised to reap less of Apple’s advantage in the future.

Distribution of stocks

Two of the hottest titles also get a new look.

Apple (AAPL) the shares are now around $ 400 cheaper after its 4-1 split, which took effect on Monday. Tesla (TSLA) the stock is $ 1,800 cheaper after its 5-1 split.

The spin-off will not change the value of an investor’s total holding in any of the companies. It will simply increase the number of shares in that pot. So investors who owned Apple will get three more shares for every share they held last week – but the value of each share will be much less. Tesla shareholders receive four shares for each share they hold.

Stock splits make stocks more affordable for ordinary investors. Apple stock is now trading around $ 128 per share, after gaining 2.6% on Monday. That’s compared to around $ 500 last week.

Tesla shares began trading at $ 468 per share on Monday, up 5.6%. It was about $ 2,200 last week.

Both stocks have soared as their split approaches, suggesting that the lower price may help attract buyers in the near future.

– Julia Horowitz of CNN Business contributed to this report.


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