Dow left behind as S&P 500 soars to record after record. What gives?

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6 days ago

The S&P 500 on Friday logged a fifth straight record close — hitting a new high for each day of the past week, a feat it hasn't accomplished since November 2021.
The Dow Jones Industrial Average, meanwhile, has yet to claim a record high in 2025.
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While speaking to the trends currently dictating the stock market, there's nothing particularly troubling in the blue-chip gauge's underperformance itself, analysts noted.
'I think it is more a reflection of the makeup of the companies within the Dow and the companies within the S&P 500 — I don't think it's a reflection of bad times to come,' Sam Stovall, chief investment strategist at CFRA Research, told MarketWatch in an interview.
The S&P 500's SPX exposure to tech stands at 33%, with communications services, which includes several megacap tech-related giants, standing at around 10%, while financials account for 14%, Stovall noted. That contrasts with the Dow DJIA, where tech accounts for 21%, communications services is 2% and financials are at 27%.
The Dow's underperformance has 'mostly to do with the re-emergence of the Big Tech and AI theme, and the S&P just having a lot more exposure to those names — in particular, names like Nvidia NVDA,' said Ross Mayfield, investment strategist at Baird Private Wealth Management, in a phone interview.
The overall market, meanwhile, stands 'in a really healthy spot right now,' he added. Below the surface, the stock rally has broadened out, with financials and industrials working well. An equal-weight measure of the S&P 500 RSP — which, as the name implies, weighs all members of the index equally, rather than by market capitalization — has also hit new highs, underlining broader participation.
Related: A new high for this breadth indicator is a sign of a healthy bull market
While the rally could likely benefit from some near-term consolidation, 'we especially like the setup,' Mayfield said.
For the week, the Dow saw a gain of 1.3% while the S&P 500 rallied 1.5%. The Nasdaq Composite COMP rose 1% on the week, and on Friday posted its 13th record close of July. So far in 2025, the S&P 500 has rallied 8.6%, while the tech-heavy Nasdaq is up more than 9%, versus a gain of 5.5% for the Dow.
The Dow came tantalizingly close to a record Wednesday, ending just 3.75 points,or 0.001%, shy of its record finish of 45,014.04, set on Dec. 4. But the index pulled back Thursday as shares of IBM Corp. IBM and UnitedHealth Group Inc. UNH slumped. It was higher on Friday, finishing just above 44,900 — a little over 100 points away from record territory.
The S&P 500, of course, is more relevant, representing a broader swath of the market. But the Dow has long stood as the public measuring stick for the health of the equities market. The Dow, after all, was first calculated in 1896, while the S&P 500 made its debut in its present form in 1957.
And there's a key difference in how the Dow is calculated versus other major indexes. While the S&P 500 and Nasdaq are weighted by market capitalization, the Dow is a price-weighted index, which means higher-priced stocks have more influence on the index regardless of their size.
It's a throwback to when calculations were done by hand, and leaves the Dow vulnerable to big swings by a single component. For example, UnitedHealth's drop from around $600 a share in April to around $275 has taken a big toll, Stovall noted.
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