Let's dive into what to make of the recent big move higher in the Dow
ByChris MacDonald, InvestorPlace ContributorMay 17, 2024, 3:04 pm EDT
- TheDow Jones Industrial Indexpushed above the key 40,000 level yesterday.
- Today’s move is pushing the index closer to this level once again, with high expectations we may close above this key benchmark.
- Let’s dive into what this move means and why investors are watching the tape so closely.
For those who haven’t picked out their Dow 40,000 hats, it’s okay. Yesterday marked the first day ever the Dow Jones Industrial Index pushed above the 40,000 level. It seems like just yesterday we were celebrating 30,000, but alas, that’s a bull market for you.
Today, the Dow Jones is up another 0.2%, within spitting distance of closing above this level. The 40,000 level for this index is a key psychological one, with traders positioning their portfolios accordingly. Higher index levels have been driven by large-cap performance (as is the case with other indices), though the makeup of the Dow is considerably different from the S&P 500 or Nasdaq.
With a focus on more industrial and blue-chip names, this index is often viewed as much more representative of the overall U.S. economy. If the market is gauging things right, perhaps that spells good times ahead.
Let’s dive into what to make of this move, and whether the Dow can end the year above this key level.
Put On Your Dow 40,000 Hats
We’ve yet to see a daily close above 40,000 on the Dow, so today’s price action will certainly be more closely watched by market pundits, traders and investors alike. Like any round number, many put outsized emphasis on where the Dow is currently trading and what may take this index to the 50,000 level down the road.
Consumer spending has remained strong, and the large-cap blue-chip stocks held in this index have certainly benefited from this trend. While less tech-heavy than other indices, it’s worth noting that the Dow does hold key mega-cap tech darlings such as Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN), which happen to be the three largest Dow components by market capitalization.
So, this index isn’t immune to the artificial intelligence (AI) related catalysts taking the market higher but is more defensive in nature. It’s also more expensive to buy (via ETFs), meaning big money investors tend to focus on this index over others. That’s something that’s worth noting for retail investors looking to gain exposure to this space.
Over time, the stock market has historically headed higher, and I think it’s just a matter of time for us to celebrate 50,000 on the Dow. How long that will take is anyone’s guess, but this price action is certainly worth paying attention to today.
Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.
Article printed from InvestorPlace Media, https://investorplace.com/2024/05/dow-40000-what-does-hitting-the-major-milestone-mean-for-investors/.
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