What's Behind the Dow's Losing Streak — and Should Investors Be Concerned?
2min read A Nine-Day Decline: Dow's Worst Run Since 1978
The Dow Jones Industrial Average (DJIA) has recently entered its longest losing streak in over four decades, declining for nine consecutive sessions. Despite this milestone, the overall drop has been relatively mild, with the index pulling back about 5% from its peak. Meanwhile, other major indices like the S&P 500 and Nasdaq remain near record highs, highlighting the disparity in performance.
The UnitedHealth Factor: One Stock, Outsized Impact
A significant portion of the Dow's decline can be attributed to UnitedHealth Group Inc. (UNH). Over the past 10 days, UNH shares have fallen by 20%, accounting for approximately 750 points of the Dow's 1,564-point loss during the streak. This singular influence reflects the unique price-weighted nature of the DJIA.
UnitedHealth has faced headwinds from bipartisan Congressional scrutiny over pharmacy benefit manager (PBM) practices and heightened political risk in the healthcare sector. Additionally, the company has been under the spotlight after the tragic killing of Brian Thompson, CEO of its insurance division, earlier this month.
Other Dow Components Struggle Amid Mixed Sector Sentiment
Beyond UnitedHealth, other Dow constituents have also underperformed. Nvidia, the AI darling added to the index in November, has seen its stock retreat by 15% from its highs amid profit-taking. Meanwhile, the Magnificent 7 stocks—this year's biggest winners—are not fully represented in the Dow. Notably, Tesla and Google, two of the strongest recent performers, are absent from the index, limiting its upside.
David Russell, Global Market Strategist at TradeStation, highlighted the role of shifting political dynamics. Wall Street is coming to terms with the fact that Trump's election victory may not be as market-friendly as initially hoped, he explained. Financials and industrials, which rallied on Trump's win, are now facing the challenges of higher interest rates and trade uncertainties, while healthcare stocks are grappling with the most significant political risks in years.
Magnificent 7 Dominate While Dow Lags
Jeff Kilburg, CEO of KKM Financial, observed a broader trend: So far this December, Magnificent 7 chasers are making a final push into year-end, driving the S&P 500 higher. Meanwhile, the rest of the market is waiting on the sidelines, leaving the Dow struggling to keep pace. This divergence underscores how concentrated performance in a few mega-cap names can skew broader indices, especially when those names are not part of the Dow.
Conclusion: A Symptom of Broader Market Divergence
While the Dow's nine-day decline may seem concerning, it reflects broader market dynamics rather than a systemic issue. The index's price-weighted structure and limited representation of high-growth tech stocks contribute to its underperformance. Investors should focus on sector-specific trends and the evolving political landscape, which could continue to shape market performance into 2024.
For now, the Dow's struggles appear more symbolic of its composition than indicative of broader market health, as evidenced by the strength in the S&P 500 and Nasdaq.
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