I thought of the old-timers when looking at IBM last night, it's why we headlined (formerly) Big Blue's earnings "DJIA: IBM stock rallies after earnings, annual outlook top Wall Street view", pointing out its membership in the Dow Jones Industrials and thought of them again this morning when looking Proctor and Gamble, also a component.
From Investor's Business Daily:
4:24 PM ET
The Dow today led the major indexes in the stock market, thanks to big earnings-driven gains by three key component stocks.With the current DJIA divisor at 0.14748071991788, so actually a multiplier of 6.78054731871, those three names accounted for 140 DJIA points. The rest of the 27 components added the remaining 31 points, with 12 being in the red.
All three indexes closed with a gain despite turning negative during the session. The Dow Jones Industrial Average rose 0.7%, the S&P 500 gained 0.2% and the Nasdaq added 0.1%. Small caps underperformed as the Russell 2000 fell 0.3%.
Volume was lower on both the NYSE and Nasdaq vs. Tuesday, according to preliminary figures. The Dow staged a solid rebound off its 50-day moving average, a level that the S&P 500 and Nasdaq have climbed above in the current stock market.
IBM (IBM) led the Dow today by gapping up and surging 8.5% to a three-month high in heavy turnover. The computer services giant announced a Q4 upside surprise on both the top and bottom lines Tuesday after the close. IBM forecasts adjusted earnings of $13.90 for the full year, above Wall Street forecasts for $13.84. Shares are 20% off their 52-week high.
United Technologies (UTX) soared more than 5% to retake its 50-day moving average as it continues to rebound from a late December bottom. The industrial conglomerate reported Q4 earnings and sales that topped views, thanks to strength in its aerospace business. United Tech shares are 18% below their September peak.
P&G Nears Buy Point In Dow Today
Procter & Gamble (PG) leapt nearly 5% as it gapped up past its 50-day average. The consumer products giant's fiscal Q2 earnings and sales came in above forecasts. It forecast slightly higher fiscal 2019 organic sales growth. The Dow component, trading near all-time highs, is about 2% away from a potential 96.99 buy point....MORE
I'm a blast at parties if someone gets me going on index construction.
On March 6, 2009, three days before the market bottomed, we posted "Manipulating the Dow Jones Industrial Average" which began:
Back in the bad old days, the specialists* in the Dirty Thirty would move their own books around to their personal benefit but from time to time would coordinate their efforts....MORE
The classic move would be to position for a decline while giving the impression to the investing public that "Hey, the water's fine, come on in".
They would do this by shorting the lower priced DJIA components while maintaining the higher priced stock, or even taking those up a bit.
When the trap was sprung, those higher priced stocks would be collapsed, triggering stop loss limit orders to feed the fear, and nary a specialist bid in sight. As the ticker spread the story to the country, the sell orders would come pouring in and accelerate the down move. Then the margin calls would go out, literally stripping stock from the accounts of the unwary.
This history came back to me as I watched IBM today. Big Blue is the highest priced stock in the DJIA. It was down $1.67 to $85.81. The current divisor is 0.1255527090 which means a $1.00 move in any component stock is worth just under 8 points on the index.
Thus a 1.16% move in IBM is worth as much to the index as a 97% move in Citi (closed at $1.03).
If these were the bad old days, and one were looking for the opposite move, up rather than down, then one would look for a way to paint a negative picture, perhaps by taking a high priced stock down while the lower priced issues were firming up.
That's how they used to do it in the old days*.
