Stock Market Today: Dow futures hold near record high after post-election rally
Regardless of whether it manages to eke out a fresh record close, Friday promises to be an auspicious day for the blue-chip Dow Jones Industrial Average.
That’s because it marks the first trading session where Sherwin-Williams and Nvidia Corp. will officially be a part of it. They officially replaced chemicals maker Dow Inc. and chipmaker Intel Corp. beginning on Friday, prior to the start of trading.
But before traders get too excited, one Wall Street veteran cautioned that their ascension to the blue-chip average might not be much of a boon for either stock.
“It is noteworthy when a well-followed market measure changes its composition, especially when it does that infrequently. But when it comes to real-world importance for the affected stocks, it is a relatively meaningless decision from an increasingly irrelevant metric,” said Steve Sosnick, chief strategist at Interactive Brokers.
In fact, new members of the Dow have often underperformed during the year after joining, a phenomenon that some have called the “Curse of the Dow.”
So far, that hasn’t been the case for Amazon.com Inc., which has risen more than 20% since replacing Walgreens Boots Alliance Inc. in February, FactSet data show.
One interesting quirk to keep in mind: Due to how the Dow is calculated, Sherwin Williams will enjoy a much heavier weighting in the average than Nvidia, despite the chipmaker having a market capitalization that is roughly 36 times larger.
That’s because the Dow is a price-weighted average, meaning it factors in the share price of stocks, not their market capitalization (which is the case for the S&P 500).
As of Thursday’s close, Sherwin Williams was trading at $380 a share, while Nvidia was trading just shy of $150.