What You're Missing About the Dow's Gain

For all of the attention the Dow Jones Industrial Average (INDEX: ^DJI  ) receives, it's actually a very poor gauge for market performance. Despite being arguably the most tracked index out there, it only comprises 30 mega-cap blue chips, and it's pretty out of whack with the other more broad indexes by weighting.

On both the S&P 500 and the Russell 3000, the top two sectors are tech and financials, but on the Dow tech is only the third-largest sector -- and 71% of that value is driven by IBM. That's why when I see the Dow up 0.5% in early morning trading, but both the S&P and the Nasdaq trading in the red, I think we're missing something.

The losers
Tech is the news-making sector today, and investing in the space isn't complete without at least some mention of Apple (Nasdaq: AAPL  ) . Last night the company reported earnings of $9.32 a share and revenue just north of $35 billion, yet both were shy of analysts' $10.36 and $37.18 expectations, respectively. Corning (NYSE: GLW  ) , a supplier of many iDevices, met analysts' earnings estimates, but fell in concert with Apple after reporting a top line 5% less than hoped. The news sent shares down to a 52-week low. As I said about Apple yesterday, though, "[W]hile it's fine to watch headlines quarter to quarter, real investors take a long-view and buy great companies with a buy-and-hold attitude in mind."

Not all bad
Despite underwhelming news from the company that comprises 20% of the tech-biased Nasdaq, there are some smaller companies lighting up investors' portfolios with huge pops. Riverbed Technology (Nasdaq: RVBD  ) and InvenSense (Nasdaq: INVN  ) hit it out of the park with 26% gains each at midday trading. Riverbed reiterated its annual sales guidance and beat on both top and bottom lines. This is welcome news for investors who worried about a loss of steam from Riverbed's WAN optimization market over the last few quarters, but that now seems to be accelerating well. InvenSense is also rebounding off perceived weakness as shares got slammed following supply chain hiccups last quarter. Both of these stocks trade at premium multiples, so investors should expect exaggerated reactions to either beating or missing estimates.

The lazy investor that tuned into just the Dow today to catch the market's pulse would have missed the most important storyline on the markets today: Apple's earnings. Make no mistake about it, this company moves markets. You can be a better investor both inside and outside of tech if you know the "5 Things You Can't Miss About Apple." I wouldn't think about investing today without having some understanding of the market's most powerful company, plus all the reasons you should buy and sell Apple. Click here to read more.

Austin Smith owns no shares of the companies mentioned here. The Motley Fool owns shares of Apple, Corning, InvenSense, and Riverbed Technology. Motley Fool newsletter services recommend Apple, Corning, and Riverbed Technology. The Motley Fool has a disclosure policy.
We Fools may not all hold the same opinions, but we all believe that
considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1957667, ~/Articles/ArticleHandler.aspx, 9/18/2014 2:02:12 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement