There's an old saying that goes ''many hands make light work," but when it comes to the Dow Jones Industrial Average (^DJI) and its burst back above 13,000, a better description might be, "a few players are doing most of the lifting."
That's because, as ConvergEx Group's Nick Colas points out, just five stocks in this 30-component index are responsible for nearly 60% of its gain.
"It's not really the heavy duty, big lifting stocks that have gotten us here," Colas says in the attached video of the benchmark's 950 point gain year-to-date. "Rather, it's consumer names, which is a little ironic given that we're worried about the consumer with the shape of the economy here."
Specifically, he points to the leadership of so-called middleweights, such as American Express (AXP), Home Depot (HD), Wal-Mart (WMT), Coca-Cola (KO), and Walt Disney (DIS) that are contributing more than their fair share. Remember, unlike the S&P 500 (^GSPC) which is a market cap weighted index, the DJIA is price-weighted, meaning the higher your share price, the more clout and influence - or weighting - you have in the index.
In the box below, you can clearly see that the top-5 heavyweights (listed below with their last approximate closing price, weighting, and YTD % gain/loss) are not pulling their weight in the Dow, with the exception of IBM and 3M.
Company Price Weighting YTD%
IBM (IBM) ($199) 11.5% +8%
Chevron (CVX) ($111) 6.4% +5%
3M (MMM) ($91) 5.3% +12%
McDonald's (MCD) ($89) 5.1% -11%
ExxonMobil (XOM) ($87) 5.0% +3%
ConvergEx's Chief Market Strategist also points to the performance discrepancy between the Dow (+8% YTD) and the 11.5% gain by the S&P 500. "The discrepancy this year is 100% financials," Colas says, adding that they are "a very, very small part of the Dow, but are 12-13% of the S&P."
As for the next millennial milestone and getting back to the all-time high of 14,164 hit in October 2007, Colas thinks the energy stocks could be what takes the Dow to the next level, having just moved to the fore after lagging for most of the year.