S&P 500   5,088.80
DOW   39,131.53
QQQ   436.78
Warren Buffett uses his annual letter to warn about Wall Street and recount Berkshire's successes
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MarketBeat Week in Review – 2/19 - 2/23
A collection of the insights Warren Buffett offered in his annual letter Saturday
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West Africa bloc lifts coup sanctions on Niger in a new push for dialogue to resolve tensions
West Africa's ECOWAS bloc says it's lifting sanctions imposed on Niger over last year’s coup in a new push for dialogue
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Macron booed by French farmers who blame him for not doing enough to support agriculture
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S&P 500   5,088.80
DOW   39,131.53
QQQ   436.78
Warren Buffett uses his annual letter to warn about Wall Street and recount Berkshire's successes
Free Stock Analysis Report: See The True Value of Any Stock (Ad)
MarketBeat Week in Review – 2/19 - 2/23
A collection of the insights Warren Buffett offered in his annual letter Saturday
Free Stock Analysis Report: See The True Value of Any Stock (Ad)
West Africa bloc lifts coup sanctions on Niger in a new push for dialogue to resolve tensions
West Africa's ECOWAS bloc says it's lifting sanctions imposed on Niger over last year’s coup in a new push for dialogue
Free Stock Analysis Report: See The True Value of Any Stock (Ad)
Macron booed by French farmers who blame him for not doing enough to support agriculture
MILAN FASHION PHOTOS: Ferragamo, Dolce&Gabbana conceal and reveal, balance transparency with cover
S&P 500   5,088.80
DOW   39,131.53
QQQ   436.78
Warren Buffett uses his annual letter to warn about Wall Street and recount Berkshire's successes
Free Stock Analysis Report: See The True Value of Any Stock (Ad)
MarketBeat Week in Review – 2/19 - 2/23
A collection of the insights Warren Buffett offered in his annual letter Saturday
Free Stock Analysis Report: See The True Value of Any Stock (Ad)
West Africa bloc lifts coup sanctions on Niger in a new push for dialogue to resolve tensions
West Africa's ECOWAS bloc says it's lifting sanctions imposed on Niger over last year’s coup in a new push for dialogue
Free Stock Analysis Report: See The True Value of Any Stock (Ad)
Macron booed by French farmers who blame him for not doing enough to support agriculture
MILAN FASHION PHOTOS: Ferragamo, Dolce&Gabbana conceal and reveal, balance transparency with cover
S&P 500   5,088.80
DOW   39,131.53
QQQ   436.78
Warren Buffett uses his annual letter to warn about Wall Street and recount Berkshire's successes
Free Stock Analysis Report: See The True Value of Any Stock (Ad)
MarketBeat Week in Review – 2/19 - 2/23
A collection of the insights Warren Buffett offered in his annual letter Saturday
Free Stock Analysis Report: See The True Value of Any Stock (Ad)
West Africa bloc lifts coup sanctions on Niger in a new push for dialogue to resolve tensions
West Africa's ECOWAS bloc says it's lifting sanctions imposed on Niger over last year’s coup in a new push for dialogue
Free Stock Analysis Report: See The True Value of Any Stock (Ad)
Macron booed by French farmers who blame him for not doing enough to support agriculture
MILAN FASHION PHOTOS: Ferragamo, Dolce&Gabbana conceal and reveal, balance transparency with cover

IBM, Verizon, Merck stocks lead Dow to new highs

photo of newspaper with words Dow Stocks prominently displayed;glasses resting on paper

Key Points

  • The S&P 500's market-cap weighting doesn't fully reflect the strength of Dow leaders IBM, Verizon, Merck, and Travelers.
  • Reliable dividend stocks like Coca-Cola and 3M contribute to the Dow's traditional market indicator role.
  • Dow stocks Apple, Microsoft, Salesforce and Amgen benefit from emerging trends like AI, cloud computing and drug development.
  • 5 stocks we like better than Alphabet

You don't hear as much about the Dow Jones Industrial Average as investors did a few decades ago, as the broad consensus has deemed the S&P 500 a better indicator of market conditions.

But the Dow is rallying to all-time highs, led by International Business Machines NYSE: IBM, Verizon Communications Inc. NYSE: VZ, Merck & Co. Inc. NYSE: MRK and perhaps an unlikely leader, insurance giant The Travelers Companies, Inc. NYSE: TRV.

Those first three components, hailing from the ranks of technology stocks, telecom stocks and pharmaceutical stocks, make sense, as those areas have been in growth mode. 

But insurance? 

As a whole, the decidedly unglamorous insurance industry has been on a tear. The iShares U.S. Insurance ETF NYSEARCA: IAK advanced 6.85% in January. 

Leading Dow stock gaps higher

Before reviewing the internals of the Dow itself, and whether it's become a relevant market indicator lately, take a look at the Travelers Companies chart. The stock leaped 6.72% on January 19 as the company reported core income more than doubled as premiums and income from investments rose, while catastrophe insurance payments declined.

Personal insurance premiums climbed 13% as customers' rates increased.


Travelers stock began rallying in late October and has posted a three-month gain of 32.01% and a January gain of 10.83%. 

Sure, Travelers looks like a good stock at the moment, as it's trading at new highs, and analysts expect double-digit earnings growth this year and next.

Dow gainers' S&P weightings

But its performance as a Dow leader is instructive, taken in context with fellow top performers IBM, Verizon and Merck.

Here's where those four stocks stack up in terms of weightings in the S&P 500:

  • IBM: 0.42%
  • Verizon: 0.43%
  • Merck: 0.75%
  • Travelers:  0.12%

You can pretty easily see that none of those are likely to make a dent in S&P performance to the degree of tech stalwarts and index heavyweights Microsoft Corp. NASDAQ: MSFT, Apple Inc. NASDAQ: AAPL, Nvidia Corp. NASDAQ: NVDA, Amazon.com Inc. NASDAQ: AMZN, Alphabet Inc. NASDAQ: GOOGL and Meta Platforms Inc. NASDAQ: META

The influence those stocks have over S&P performance has been widely documented. Like the Dow, the S&P 500 is also trading at new highs, driven by AI business of stocks including Nvidia, Juniper Networks Inc. NYSE: JNPR and Advanced Micro Devices Inc. NASDAQ: AMD.

Is the Dow a market strength indicator?

But that brings us back to the question of whether the Dow has renewed value as a market indicator. 

The S&P's market-cap weighting isn't reflecting the strength of IBM, Verizon, Merck and Travelers in its overall return. That arguably puts the Dow in a position of more accurately indicating market breadth beyond a handful of stocks rallying on the promise of AI. 

It may seem old-fashioned to look to the Dow as a market indicator. That makes sense, given the Dow's inclusion of reliable dividend stocks such as Coca-Cola Co. NYSE: KO and 3M Co. NYSE: MMM, with less reliance on fast-moving, younger growth stocks. 

Despite its smaller size compared to the S&P 500, the Dow's 30-stock concentration gives it some value as a  snapshot of traditional blue-chip stock movements.

Dow also tracks market's growth themes

At this juncture, it's not a bad indicator of market health outside of stocks rallying on gains from hot investing themes including AI, cloud computing and anti-obesity drugs. All of those offer a compelling investment thesis, but they represent very select corners of the market. 

That's not to say there aren't stocks in the Dow benefiting from those trends. For example, Apple, which rallied in 2023 despite not being an AI player, is getting new attention for its AI efforts and the launch of its Vision Pro spatial computing headsets. 

Dow components Microsoft and Salesforce Inc. NYSE: CRM have a presence in both AI and cloud computing, and Amgen Inc. NASDAQ: AMGN has been rising due to its applications of AI in the field of drug discovery, as well as its advances in cancer treatments. 

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Alphabet (GOOGL)
2.5946 of 5 stars
$143.96-0.1%N/A24.82Moderate Buy$153.65
Amazon.com (AMZN)
4.9396 of 5 stars
$174.99+0.2%0.11%60.34Buy$197.95
Amgen (AMGN)
4.833 of 5 stars
$289.18+1.4%3.11%23.15Hold$295.30
Apple (AAPL)
4.9102 of 5 stars
$182.52-1.0%0.53%28.43Moderate Buy$205.27
International Business Machines (IBM)
4.6476 of 5 stars
$185.72+0.8%3.58%22.84Hold$171.92
iShares U.S. Insurance ETF (IAK)N/A$111.22+0.2%1.39%13.59N/AN/A
Juniper Networks (JNPR)
4.5551 of 5 stars
$37.18+0.1%2.37%39.14Hold$34.58
Microsoft (MSFT)
4.8616 of 5 stars
$410.34-0.3%0.73%37.10Moderate Buy$411.06
Coca-Cola (KO)
4.2051 of 5 stars
$61.20+0.1%3.01%24.68Moderate Buy$67.00
Travelers Companies (TRV)
4.4362 of 5 stars
$220.96-0.6%1.81%17.28Hold$201.38
Verizon Communications (VZ)
4.618 of 5 stars
$40.66-0.2%6.54%14.73Moderate Buy$44.00
NVIDIA (NVDA)
4.5134 of 5 stars
$788.17+0.4%0.02%66.01Moderate Buy$820.03
Salesforce (CRM)
4.6833 of 5 stars
$292.80-0.3%N/A111.33Moderate Buy$269.86
Advanced Micro Devices (AMD)
4.4176 of 5 stars
$176.52-2.9%N/A339.47Moderate Buy$179.06
Meta Platforms (META)
4.0266 of 5 stars
$484.03-0.4%0.41%32.49Moderate Buy$494.53
Merck & Co., Inc. (MRK)
4.7972 of 5 stars
$129.45+0.1%2.38%924.64Moderate Buy$130.12
Compare These Stocks  Add These Stocks to My Watchlist 

Kate Stalter

About Kate Stalter

  • stalterkate@gmail.com

Contributing Author

Retirement, Asset Allocation, and Tax Strategies

Experience

Kate Stalter has been a contributing writer for MarketBeat since 2021.

Additional Experience

Series 65-licensed investment advisor, financial advisor, Blue Marlin Advisors; investment columnist for Forbes, U.S. News & World Report

Areas of Expertise

Asset allocation, technical and fundamental analysis, retirement strategies, income generation, risk management, sector and industry analysis

Education

Bachelor of Arts, Saint Mary’s College, Notre Dame, Indiana; Master of Business Adminstration, Kellogg School of Management at Northwestern University

Past Experience

Founder, financial advisor for Better Money Decisions; editor, stock trading instructor for Investor’s Business Daily; columnist, podcast host, video host for MoneyShow.com; contributor for Morningstar magazine


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