Imagine If IBM Participated In The Rally Today
The major stock indexes are soaring higher this afternoon. The Dow Jones Industrial Average(DJIA) is trading higher by 126.00 points to 12,751.00. The DJIA is just 127.00 points away from its May 2011 top. The DJIA has now rallied higher by 888.00 points since its June 15, 2011 pivot low. What a rally these markets have had since the second Greece bailout or bank bailout package was approved.
We can only wonder how high the Dow Jones Industrial Average would be if International Business Machines Inc.(NYSE:IBM) was trading in positive territory. IBM stock is trading lower this afternoon by $1.17 to $176. 54 a share. This stock carries the most weight in the DJIA which consists of just thirty blue chip companies. You see, the DJIA is a price capitalization index, unlike the S&P 500, and the NASDAQ Composite, which are market capitalization weighted indexes. Therefore, the higher the price of the stock in the index the more it will effect the DJIA. If IBM were trading flat today that would probably add another 40.0 – 50.0 points to the price of the DJIA.
The only other stocks that are trading lower today that make up the Dow Jones Industrial Average are Pfizer Inc.(NYSE:PFE), and Verizon Communications Inc.(NYSE:VZ). Obviously, these stocks have very little effect on the DJIA since they are lower priced stocks.