Business

Why the Dow is having a terrible month as it heads to its best October ever


The Dow Jones Industrial Average has been criticized by some market watchers for being a poor measure of equity market performance due to its relatively small sample size of just 30 stocks.

But this quality, coupled with the abundance of megacap tech names, has helped propel the index towards what is expected to be the biggest October gain in its 126-year history.

With a month-to-date gain of 14%, the Dow
DJIA,
+ 2.52%

is on track for its best monthly performance since January 1976, when it was up 14.4%, according to Dow Jones Market Data. To hit October’s best-ever, it only needed to sustain a monthly gain of 10.65% by the time the US markets closed on Monday.

The Dow is still in a bear market and is still down more than 10% this year. However, that compares with the S&P 500’s 18.6% loss to date
SPX,
+ 2.31%

and 29.6% for Nasdaq Composite
COMP,
+2.63%
.

What exactly made the Dow’s October performance so stellar?

Art Hogan, chief market strategist at B. Riley Wealth Management, said the blue-chip index, which includes energy and industrial stocks, is among the best performing sectors for the stock market since from the beginning of the year.

These stocks have performed exceptionally well since the start of the latest quarterly earnings season, while megacap tech names like Meta Platforms Inc.
META,
+ 1.17%
,
Amazon.com Inc.
AMZN,
-7.65%

and Alphabet Inc.
GOOG,
+ 4.06%

went viral after releasing results and guidance that disappointed Wall Street this week.

“It’s very light on technology, and very heavy on energy and industry, and those people have been the winners,” Hogan said. “The Dow has more winners attached to it and that is the secret to its success.”

See: Direct market scope

The Dow is on track to record its highest close in at least two months on Friday as it outperforms the S&P 500
SPX,
+ 2.31%

and Nasdaq Composite
COMP,
+2.63%
.
Furthermore, it is on track for a sixth straight session of gains, which will be its longest winning streak since May 27, according to DJMD.

Adding to the list of notables, the average is also on track to record its fourth straight weekly gain, which would cement its longest winning streak since November 5, 2021, when only This number increased for five consecutive weeks.

Caterpillar Inc.
CAT,
+ 3.07%
,
Chevron Corp.
CVX,
+ 0.71%

And Amgen Inc.
AMGN,
+ 2.25%

are the top-performing Dow stocks so far this month, having gained 29.3%, 21.2% and 18.3%, respectively, as of Friday.

In recent trading, the blue-chip average rose about 700 points, or 2.2%, tracking its biggest daily and percentage gain in exactly a week.

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