The largest one-day percentage gain in the DOW index, 15.34%, happened on March 15, 1933, in the depths of the 1930s bear market.
The largest one-day percentage drop occurred on "Black Monday", October 19, 1987, when the average fell 22.61%.
This may be a good time to reflect on excerpts from an article from last year by John Reese (3/5/08) at MoneyCentral.com:
"...adding Bank of America and Chevron and dropping Honeywell and Altria...recently..." (early 2008)
Per the Dow Jones Release: "...B of A was added because financials were underrepresented in the index, and Chevron because the oil and gas industry's importance to the world's economy is growing..."
What timing.
In summary, author of the March 2008 MSN article, John Reese, states:
"...If the 30 stocks that make up the Dow don't look appealing at a given time, that doesn't mean you should avoid the market altogether. With thousands of stocks out there to choose from, you can always find good values -- whether the Dow looks good or not..."
So remember:
First, Bank of America was not even in the DOW JONES INDUSTRIAL AVERAGE in 2007.
Second, The DOW is price-weighted, meaning each company makes up a fraction of the index that is proportional to its price not market capitalization (price times number of shares).
Third, since the DOW is a price-weighted index and financials and GM have nose-dived, their large effect on the DOW's down-side may be less in the DOW's eventual recovery which may come from the non-financial companies. No guarantees just an interesting thought. GM is the only auto manufacturer in the DOW - not Ford or Chrysler or any others.
Fourth, Dow's stocks have an average market capitalization of $147 billion, versus $28 billion for the S&P 500. They are "big" companies but it is price (with adjusting factors) not market-weight that makes the difference. (statistics change every day but this is an idea of size)
Fifth, (per Wikipedia history) "...the "industrial" portion of the name is largely historical—many of the 30 modern components have little to do with traditional heavy industry. At one time it had 9 railroads, 2 Industrial stocks and GE (the only company that has survived to today)..."
The point: the composition of the DOW changes from time to time. It may be in for another change after this avalanche.
Sixth, Microsoft, Intel, Home Depot and AT&T were added in 1999 replacing others and Pfizer and Verizon were added in 2004 replacing other companies. This has an effect on the DOW index and should be watched.
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.