Five Stocks Drive Dow to New Record

Five stocks accounted for more than half of the Dow Jones Industrial Average’s latest push to a record high above 17000.

The 30 blue-chip companies in the Dow needed 153 trading days to go from 16000 in November to 17000 on Thursday, the seventh-fastest 1000-point advance in the Dow’s history. Over that stretch, Caterpillar Inc.(CAT), Walt Disney Co.(DIS) and 3M Co.(MMM) were the three biggest drivers of the index. Visa Inc.(V) and American Express Co. rounded out the top five.

The Dow is a price-weighted index, meaning the bigger the stock price, the larger the sway for a particular component. That is different from most other indexes, such as the S&P 500, which are weighted by its components’ market capitalizations.

Caterpillar rallied 35% during the time the Dow went from 16000 to 17000, meaning it contributed about 186 points, or 19%, to the Dow’s 1,000-point advance. Disney contributed 108 points to the Dow during that time frame due to its 24% rally. 3M jumped 12%, good enough to add 96 points to the Dow.

Only seven of the 30 Dow components fell during the Dow’s run from 16000 to 17000. Procter & Gamble Co.(PG) was the worst performer, down 5.5% during that time frame. Pfizer Inc.(PFE) dropped 4.5% and Wal-Mart Stores Inc.(WMT) declined 3.9%.

The Dow closed Thursday at 17068, its 14th record high of the year. It is up 3% this year, although it continues to lag other benchmarks such as the S&P 500 and Nasdaq Composite, which are each up 7.4%. As we noted earlier this week, a couple of high-priced Dow components, such as Goldman Sachs and IBM (IBM), have weighed on the Dow this year.

Most market watchers aren’t concerned by the discrepancy between the Dow and the other stock indexes. What they really want to know is just how much more stamina the rally has left.

“This is a reflection of the improving economy and earnings environment being generated by the American economy,” said Stuart Freeman, chief equity strategist at Wells Fargo Advisors. “Favorable fundamentals and attractive valuations, in our opinion, continue to carry the major indices higher.”

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