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By Staff Reporters

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The Dow Jones Industrial Average is a collection of 30 “blue-chip” U.S. stocks. Blue chip = big, established, and influential companies like Microsoft, JPMorgan, Disney, and McDonald’s. The Dow recently updated its roster, swapping ExxonMobil, Pfizer, and Raytheon for Salesforce, biotech Amgen, and manufacturing heavyweight Honeywell.

The Dow is weighted by share price, so higher-priced stocks have more influence on the index’s total value. Price-weighting also means that if the price of any stock in the Dow changes by $1, it has the same impact on the index, even though a $1 increase to a stock worth $20 is more significant (relatively) than a $1 change to a stock worth, say, $40.

• During stock splits—when a company increases its number of outstanding shares and chops prices by the same factor—a company’s influence in the Dow can fall even if their market value doesn’t change. The Dow has some mechanisms to account for stock splits, but they can still lead to a shakeup in the index (like what happened last summer).

At 124 years old, the Dow has had plenty of time to cement its reputation as a leading indicator of the stock market. But with only 30 stocks representing a smattering of U.S. corporate titans, it’s not exactly representative.

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At one point the Dow Jones Industrial Average was up 585 points before it sold off later yesterday afternoon, though it wrapped the trading session with a small win. The S&P 500 fought its way into positive territory but struggled to stay there, eventually sinking into negative territory at the end of the day.

As for the NASDAQ, the tech selloff continued to punish the index for most of yesterday afternoon. Treasury yields fell a bit on positive GDP news, though the big PCE [personal consumption expenditures] announcement is the one investors have been waiting for.

Oil popped on a stronger than expected GDP reading, with traders banking on future economic growth and stronger oil demand.

Bitcoin sank a bit yesterday ahead of a major conference that could set the tone for the entire digital asset industry for years to come.

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Filed under: "Ask-an-Advisor", Experts Invited, Financial Planning, Funding Basics, Glossary Terms, Investing | Tagged: Bitcoin, bonds, DJIA, DJIA stock index, DOW, GDP, NASDAQ, oil, S&P 500, Treasury yields |