How Wal-Mart Drives the Dow

The following video is part of our "Motley Fool Conversations" series, in which consumer-goods editor and analyst Austin Smith discusses topics around the investing world.

In today's edition, Austin sheds a little light on how Wal-Mart influences the Dow Jones Industrial Average's daily movements. Despite being the world's largest retailer, and one of the largest companies on the Dow by market cap, investors may be surprised to learn that the company makes up only 3.5% of the index's overall composition. However, Austin thinks the company actually has a bit more influence than this weighting suggests. While Wal-Mart may never reach the influence of, say, IBM, which dominates the Dow's movements, he thinks the fact that the retailer is considered an economic bellwether influences the other 17% or so of non-cyclical stocks that comprise the index in a not-so-obvious way.

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Austin Smith has no positions in the stocks mentioned above. The Motley Fool owns shares of IBM. Motley Fool newsletter services recommend Chevron. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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