What’s driving the Dow Jones Industrial Average’s new highs after finally breaking out in mid-November? Two points to set the discussion:
- The Dow hit a new all-time high on November 16th after going through first a sharp shock from the old highs in February to late March and then slowly recovering thereafter. Since the close on November 13th, this price-weighted (not market cap, like the S&P 500) index is up 2.4 percent through today’s close.
- We calculated the point contribution for the Dow’s 30 components since November 13th through today in order to determine its largest winners and laggards over that period.
Here’s what we found:
#1: Just 10 of the 30 holdings make up a little over half (52 pct) of the index:
- UnitedHealth: 7.6 pct
- Home Depot: 5.8 pct
- Goldman Sachs: 5.2 pct
- Boeing: 5.1 pct
- Amgen: 5.0 pct
- Salesforce: 4.9 pct
- Microsoft: 4.7 pct
- Honeywell: 4.6 pct
- Visa: 4.6 pct
- McDonalds: 4.6 pct
#2: The Dow is up 694 points since November 13th, of which all came from:
- Boeing (56 percent), up 390 points
- Goldman Sachs (19 pct), up 134 points
- Disney (15 pct), up 105 points
- Honeywell (10 pct), up 66 points
#3: One third of the Dow is in the red since November 13th; the 3 largest laggards include:
- Salesforce (down 131 points)
- Home Depot (-99 points)
- Amgen (-57 points)
Here are our two main takeaways from the data:
#1: Just four names account for the Dow’s advance to new highs since mid-November: Boeing, Goldman Sachs, Disney and Honeywell. While Goldman Sachs, Boeing and Honeywell are the index’s fourth, fifth and ninth top weights respectively, Disney is not even in the top ten, but has rallied enough to be a significant point contributor.
#2: Two out of the three latest additions to the Dow on August 31st are also in the top 3 worst performers since mid-November. The Dow added Salesforce, Honeywell and Amgen on August 31st, which replaced ExxonMobil, Raytheon and Pfizer. Since November 13th, Salesforce and Amgen are down 8.7 pct and 3.6 pct respectively (subtracting a total 188 points from the Dow during that period), while Honeywell is up 5.2 pct (adding a healthy 66 points to the index). By comparison, ExxonMobil (+17 pct), Raytheon (+13 pct) and Pfizer (+16 pct) are all up strongly during that timeframe.
Bottom line: the four names – Boeing, Goldman Sachs, Disney and Honeywell – driving the Dow to new highs since its breakout in mid-November reflect confidence in reopening trades and a steepening yield curve after the encouraging vaccine news. Both are positive signals about the US economic recovery in 2021.