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A Little More Doom in the Dow

By Rick Munarriz – Updated Apr 6, 2017 at 2:43AM

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American Express shares dipped below $10 for a bit on Friday. 

One of the creepiest episodes from the original Twilight Zone series involves a patient having nightmares. Every night, she winds up in a vivid dream world where a mysterious nurse beckons the patient to follow her down to Room 22 in the basement. Eventually we learn that Room 22 is actually the hospital's morgue, which makes it all the more ominous because her dreams always end with the sinister nurse telling her, "Room for one more, honey."

Well, the morgue of Dow components trading in the single digits grew to include a temporary resident on Friday, as shares of American Express (NYSE:AXP) fell to $9.71. The stock recovered when the market bounced back, ending the day at $10.26.

It became the sixth member of the 30-stock Dow Jones Industrial Average to dip below the $10 mark during this downturn. It joins a few companies that are household names.

Company

Price Per Share

Alcoa (NYSE:AA)

$5.22

Bank of America (NYSE:BAC)

$3.14

Citigroup (NYSE:C)

$1.03

General Electric (NYSE:GE)

$7.06

General Motors (NYSE:GM)

$1.45

Source: Yahoo! Finance. Prices from March 6 close.

Because the Dow is a price-weighted index -- where every point a stock gains or loses moves the gauge by 7.96 points -- having too many low-priced stocks can distort its credibility.

Add up Friday's close on all six stocks and you arrive at a price of $28.16, accounting for just 224 points of the Dow's close at 6,626. In other words, the bottom 20% of Dow components makes up just 3% of the index.

It's really just a matter of time before the brain trust that establishes the historic -- yet flawed -- index begins to clean house.

For American Express' sake, let's hope it stays out of the single digits now. When the index eventually resets, "room for one more" could be a death sentence.

For related Foolishness:

American Express is a Motley Fool Inside Value pick. The Fool owns shares of American Express. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz is glad to see that the old Twilight Zone episodes are now online. The "Twenty Two" episode can be found on the CBS site. He does not own shares in any of the companies mentioned in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

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Stocks Mentioned

American Express Company Stock Quote
American Express Company
AXP
$140.26 (-1.94%) $-2.77
Alcoa Inc. Stock Quote
Alcoa Inc.
AA
Citigroup Inc. Stock Quote
Citigroup Inc.
C
$44.26 (-2.90%) $-1.32
Bank of America Corporation Stock Quote
Bank of America Corporation
BAC
$31.73 (-2.37%) $0.77
General Electric Company Stock Quote
General Electric Company
GE
$64.55 (-1.24%) $0.81
General Motors Company Stock Quote
General Motors Company
GM
$35.48 (-5.08%) $-1.90

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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