Dow Jones Industrial Average Index fell for the ninth consecutive day on Tuesday which is now one of its longest red streaks in decades.
What Happened: The index last saw such a streak of decline in February 1978, according to FactSet data. However, the index has seen steeper crashes in a single day as compared to the cumulative erosion it has witnessed over these nine days.
Dow Jones has fallen nearly 3.47% to 43,449.90 points over the last nine days since Dec. 4, when it was at 45,014.04 points.
According to an X post by the chief market strategist at Carson Research, Ryan Detrick, “Since 1900, I see 267 times it lost more than 3.47% in a single day.”
Why Is Dow Falling: The Dow Jones Industrial Average is a price-weighted index based on 30 U.S. stocks, which first started as an index of 12 industrial stocks. The index has been subject to criticism for its limited scope, particularly its underrepresentation of technology stocks, a sector that has exhibited substantial growth in recent times.
Nvidia Corp (NASDAQ:NVDA) moved to the Dow Jones index, replacing Intel Corp (NASDAQ:INTC) on Nov. 4, this year. Nvidia has split its stock two times in the past four years, the most recent of which was a 10-for-1 swap that took effect in June, which has made it easier for Dow to include the shares in its gauge.
This is because Dow’s price-weighted methodology is troublesome for technology companies that abstain from splits and have shares trading above $1,000.
A given percentage change in the price of a higher-priced stock has a greater impact on the price-weighted index’s value than does an equal percentage change in the price of a lower-priced stock. Put another way, higher-priced stocks have more weight in the calculation of a price-weighted index.
Thus, the investor preference for technology stocks lately could also be a reason for the fall in the Dow Jones.
“The DJIA hasn’t reflected its original intent in decades. It is not really a reflection of industrial America,” said Mitchell Goldberg, president of ClientFirst Strategies in a LinkedIn post. “Its losing streak is more of a reflection of how investors are gorging themselves on tech stocks.”
Price Action: The Dow has gained 15.21% on a year-to-date basis, 11.88% in the last six months and just 0.14% over the last month.
The exchange-traded fund tracking the index, SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA) grew by 15.51% on a year-to-date basis, 11.93% over the last six months and just 0.32% over the last month.
The losing streak comes as investors braced for the Federal Reserve’s interest rate decision due on Wednesday. While a 25-basis-point rate cut is largely expected, market participants are wary of potential signals from the Fed regarding a slowdown in the pace of future rate reductions in 2025.
However, despite the recent downturn, the blue-chip index has still managed to remain 1,500 points, or 3.5%, above its level on Election Day.
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