Stocks generally suffered a slight pullback on Thursday morning, as investors gave back some of the big gains the markets enjoyed following yesterday afternoon's Federal Reserve announcement that indicated a general bias against rapid interest rate increases in the foreseeable future. As of 10:55 a.m. EDT, the Dow Jones Industrials (DJINDICES:^DJI) were down 98 points, while the broader-based S&P 500 (SNPINDEX:^GSPC) had lost nearly 10 points. Yet perhaps the most surprising thing about today's session is that Apple (NASDAQ:AAPL) barely budged from the unchanged mark despite its official entrance into the Dow. For those expecting big fireworks when the tech stock joined the average, the lack of volatility might come as a shock, but it demonstrates how relatively unimportant the Dow has become.
Why the Dow doesn't get much love
Investors are used to seeing stocks move abruptly when they enter or exit popular indexes. Standard & Poor's, for instance, regularly makes additions and removals from its key indexes, and achieving a place in the S&P 500 can give a stock a huge short-term boost. Similarly, with the Russell family of indexes making annual rebalancing moves and naming replacements for key benchmarks, shareholders spend months before the June update seeking to exploit likely changes to much-followed indexes.
Yet for all the attention the Dow receives as a barometer of the overall market, it doesn't attract the same attention from passive investors through index-linked investments such as exchange-traded funds. One indication of the Dow's unpopularity in this context comes from the SPDR family of ETFs. The SPDR Dow Jones Industrial Average ETF (NYSEMKT:DIA) tracks the Dow by owning all 30 stocks within the average. But it has only about $12 billion in assets under management, and while that might seem large, it pales in comparison to the SPDR S&P 500 ETF (NYSEMKT:SPY) and its $194 billion in assets.
Even in the leveraged ETF world, the S&P still reigns over the Dow. The ProShares Ultra S&P 500 ETF (NYSEMKT:SSO) has more than $2 billion in assets. By comparison, the ProShares Ultra Dow ETF (NYSEMKT:DDM) has attracted only about $340 million.
Because the Dow isn't as closely followed by index investors as its peers, the entry or exit of a key component doesn't have as big an impact on the company's share price. Especially for Apple, with a roughly $750 billion market cap that dwarfs those of its new peers on the Dow, buying pressure from a $12 billion Dow ETF simply won't move the needle much.
Apple's entry into the Dow appropriately reflects the company's importance to the U.S. economy. But for those seeking a quick profit from its inclusion in the average, Apple will provide a rare disappointment -- at least until it can demonstrate its ability to help lift the Dow in the long run.