The dream of Dow 20,000 is nearly a reality. A handful of stocks sped the march.
Eight stocks in the Dow Jones industrial average, including Goldman Sachs, Travelers and UnitedHealth, added 40 or more Dow points to the market measure apiece — making them the biggest contributors to the much-awaited feat. These eight Dow members together added 611 of the 1,000 points the Dow needed to break 20,000, since hitting 19,000 on Nov. 22. The Dow is constructed in a way that stocks with the highest per-share dollar values contribute the most points.
It's not just points, but dollars, too. These big winners added $92 billion in market value to the pockets of investors — nearly half of the $215 billion in market value added by all 30 Dow stocks since the market measure first closed above 19,000.
"No matter your view of whether prices are expensive or inexpensive, a new record level for the market is to be celebrated," says Michael Farr, CEO of money management firm Farr, Miller & Washington.
The Dow stocks that gained the most in part reflect investors' hopes for the government's direction after the surprise election of Donald Trump as president. But being so near a record 1,000-point move, which is a less impressive 5.3% climb, also highlights what investors are looking for:
• More profits ahead for financials
Trump's campaign promise to reduce government regulation and borrow money to finance government-led infrastructure plans has helped banks and other financial firms. Goldman Sachs is the biggest winner since the Dow hit 19,000, single-handedly delivering a 14% gain to $240.97 a share, which translates into 204 Dow points. Goldman's contribution to the Dow is more than twice that of the second-largest contributor in terms of Dow points, United Health. Financials are expected to benefit from fewer rules that inhibit the types of loans they can make. Additionally, rising long-term interest rates are seen as a benefit as bank customers must pay more for loans. Two other financials are among the eight best Dow stocks, including insurer Travelers and JPMorgan Chase, making the financial sector the one with the majority of big winners. "Financials have taken the baton and run with it," says Ryan Detrick, market strategist at LPL Financial.
• Gains from all corners
Unlike other market rallies in history that left large groups of sectors or stocks behind, the march to Dow 20,000 has lifted almost all stocks. Just three Dow stocks — credit card processor Visa, Walmart and drugmaker Merck — have slipped since Dow 19,000. And even Merck, the worst stock since Dow 19,000, is down just 3.5% to $59.56. Merck's slip has cost the market measure less than 15 Dow points since it hit the 19,000 mark.
• Energy and industrials pick up steam
It has been some time since energy and industrial stocks have participated in the rally, but they've been big players since Dow 19,000. Three of the biggest eight winners in the Dow hail from those two sectors, including Chevron in energy and Boeing and 3M among industrials. Oil prices have risen roughly 12% since the Dow hit 19,000. President-elect Trump is likely to enact rules to help industrial and energy companies.
In the longer term, the Dow's rally from 10,000 in March 1999 to 19,934 shows that while some stocks have disproportionately benefited since the election, others haven't as much. Apple, with its 9,120% gain since Dow 10,000, has been the biggest winner among current Dow members in that time frame. But since Dow 19,000, Apple's 32 Dow-point contribution and 4.2% gain ranks it outside the leading eight. Health insurer UnitedHealth continues to be a big winner. The company's stock rose 2,400% since Dow 10,000 — second best since then — and also added 74 Dow points since 19,000.
"Remember the rule of buying low. This isn't low or anywhere near low. So, be happy, be optimistic, but be careful," Farr says.