Dow Rally Is Widening Beyond First-Half Winners

• The Dow Jones Industrial Average snapped a 13-day winning streak on Thursday.
• But the breadth of its latest rally has widened beyond Big Tech, a sign that gains are looking more sustainable. 
• Microsoft accounted for two-thirds of the Dow’s first-half gains, but laggards are catching up, DataTrek notes. 

The Dow Jones Industrial Average is drawing strength from all corners of the index right now after mostly relying on Big Tech names during the first half of 2023. 

In a Friday note to clients, DataTrek Research highlighted that, despite the Dow snapping its 13-day win streak the day before, the wider breadth that fueled the rally should give investors reason for optimism. Rather than relying on a small batch of notables to do the heavy lifting, a majority of the index has turned green. 

In short, Big Tech names and a handful of other standouts are no longer the only stocks fueling the Dow to more gains. 

So far this year, a red-hot S&P 500 has outshined the Dow, with the indexes posting about 18% and 6.4% year-to-date gains, respectively. Because of its price-weighted composition, the 30-company index isn’t always Wall Street’s go-to gauge for equity performance. 

Notably, however, the Dow’s 3.8% climb in the first six months of the year came as 19 of its 30 companies were in the red. Microsoft alone accounted for 67% of the Dow’s gains, DataTrek noted, and other heavy names like Apple, McDonald’s, Visa, American Express, and Boeing filled out most of the rest.

Yet in July, the Dow has climbed 2.5% and saw 19 of its 30 names in the green.

Six names have made up 98% of its advance since June, according to DataTrek: Goldman Sachs, UnitedHealth, Boeing, Home Depot, Amgen, and Salesforce. Through the first half of the year, Goldman, UnitedHealth, and Amgen were among the index’s worst performers. The first two are the two highest-weighted stocks in the index.

“The Dow has had a strong start to 2H because some of its highest weighted stocks have started to work much better,” DataTrek cofounder Jessica Rabe said. “In fact, UnitedHealth and Goldman Sachs have accounted for almost half (44 pct) of the Dow’s rally MTD. Additionally, Amgen – the Dow’s 8th highest weighting – was the second most detrimental stock to the index in 1H, but its 5th best contributor MTD.”

With non-tech names picking up the slack while stocks like Microsoft and Apple — the Dow’s only two Big Tech names — have eased, the index generally looks more balanced as it enters the second half of the year.

“Ultimately, the Dow’s MTD advance shows a healthier capital markets setup for for 2H than 1H with the rally broadening out beyond Big Tech,” Rabe said. “This trend does, however, need to continue to maintain this important signal of market health.”

• The Dow Jones Industrial Average snapped a 13-day winning streak on Thursday.
• But the breadth of its latest rally has widened beyond Big Tech, a sign that gains are looking more sustainable. 
• Microsoft accounted for two-thirds of the Dow’s first-half gains, but laggards are catching up, DataTrek notes. 

The Dow Jones Industrial Average is drawing strength from all corners of the index right now after mostly relying on Big Tech names during the first half of 2023. 

In a Friday note to clients, DataTrek Research highlighted that, despite the Dow snapping its 13-day win streak the day before, the wider breadth that fueled the rally should give investors reason for optimism. Rather than relying on a small batch of notables to do the heavy lifting, a majority of the index has turned green. 

In short, Big Tech names and a handful of other standouts are no longer the only stocks fueling the Dow to more gains. 

So far this year, a red-hot S&P 500 has outshined the Dow, with the indexes posting about 18% and 6.4% year-to-date gains, respectively. Because of its price-weighted composition, the 30-company index isn’t always Wall Street’s go-to gauge for equity performance. 

Notably, however, the Dow’s 3.8% climb in the first six months of the year came as 19 of its 30 companies were in the red. Microsoft alone accounted for 67% of the Dow’s gains, DataTrek noted, and other heavy names like Apple, McDonald’s, Visa, American Express, and Boeing filled out most of the rest.

Yet in July, the Dow has climbed 2.5% and saw 19 of its 30 names in the green.

Six names have made up 98% of its advance since June, according to DataTrek: Goldman Sachs, UnitedHealth, Boeing, Home Depot, Amgen, and Salesforce. Through the first half of the year, Goldman, UnitedHealth, and Amgen were among the index’s worst performers. The first two are the two highest-weighted stocks in the index.

“The Dow has had a strong start to 2H because some of its highest weighted stocks have started to work much better,” DataTrek cofounder Jessica Rabe said. “In fact, UnitedHealth and Goldman Sachs have accounted for almost half (44 pct) of the Dow’s rally MTD. Additionally, Amgen – the Dow’s 8th highest weighting – was the second most detrimental stock to the index in 1H, but its 5th best contributor MTD.”

With non-tech names picking up the slack while stocks like Microsoft and Apple — the Dow’s only two Big Tech names — have eased, the index generally looks more balanced as it enters the second half of the year.

“Ultimately, the Dow’s MTD advance shows a healthier capital markets setup for for 2H than 1H with the rally broadening out beyond Big Tech,” Rabe said. “This trend does, however, need to continue to maintain this important signal of market health.”