For the first time ever, the Dow Jones Industrial Average passed the 30,000 mark. It happened around 11:30 a.m. ET Tuesday.
“The broad market has been moving higher on optimism that forthcoming vaccines herald a return to normalcy in 2021,” Bankrate.com’s chief financial analyst Greg McBride says. “The rising market is boosting the value of millions of Americans’ retirement accounts and is a testament to the old adage about not trying to time the market. After a 34% plunge from mid-February to late March, who could have foreseen a rebound that is taking the market to repeated new highs despite the virus still raging? As investors, you have to be in it to win it.”
The Dow is a price-weighted measure of 30 U.S. blue-chip companies, including Walmart, Verizon, Microsoft, Coca-Cola, 3M, Nike, Disney, and Apple, that represent most industries. The measure, which was invented by Charles Dow in 1896, crossed 1,000 for the first time in November 14, 1972; 10,000 on March 29, 1999; and 20,000 on January 25, 2017. The last big round number—29,000—was on January 15 of this year. The Dow opened today at $29,746.11.
Today’s historic news “signals that investors are a lot more confident about the future than the present,” says Arthur Dong, professor of practice at Georgetown University’s McDonough School of Business. But he adds that the measure’s rise has little impact on small businesses. “There is disconnect between what happens on Wall Street and Main Street. The pain on Main Street continues to persist.”
The Dow is an average, not an indicator, but over time, people have assigned more importance to it than necessary.
“While the figures have no particular significance, they tend to capture the attention of investors and the media alike, and can have a psychological impact that sometimes influences market behavior,” the Dow’s website says.
McBride explains that the Dow isn’t the best barometer of the stock market and prefers to look at the S&P 500, which also has moved to a record high. As of midday, the S&P 500 rose close to 1.6%. The Nasdaq Composite Index was up a little more than 1%.