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The Key Takeaways
- On Wednesday, the Dow Jones Industrial Average recorded its longest losing streak of 50 years. It fell for the tenth consecutive session.
- Wednesday's drop came after the Federal Reserve scaled back its forecast for interest rate cuts amid uncertainty about the path of inflation in the coming year.
- In the nine previous days, stock prices fell after the murder of an executive of UnitedHealth Group. This brought attention to health care and weighed on shares in this sector, as well as the Dow Jones price-weighted index.
- Nvidia, one of the Dow's newest members, has also trailed the market and dragged down the index in recent weeks.
The Dow Jones Industrial Average fell Wednesday, after having fallen in all nine of its previous sessions. Its longest streak of daily losses was since 1974.
Blue-chip index fell 6% in its most recent losing streak. The S&P 500 and the Nasdaq Composite have shed a comparatively modest 3.5% and 1.8%, respectively, despite suffering more painful routs on Wednesday.
Why have the three main indexes of America, which each contain stocks from some of America’s biggest companies, recently diverged?
Dow drops after CEO’s death, UnitedHealth Slides
UnitedHealth Group shares (UNH), which were traded on December 4, when the insurance division’s CEO was killed in a shooting attack, lost over 20% in value during the nine days following that date. This incident has brought the healthcare industry in America back into the spotlight. The Dow also closed at a higher level on that day.
After the shootings, legislators have proposed legislation that would force certain large healthcare companies to be broken up. President-elect Donald Trump also promised to do so. “take out the middleman,” Referring to Pharmacy Benefit Managers (PBMs), which negotiates drug prices for insurers, government plans, and employers.
Between Dec. 4, and Tuesday, shares of CVS Health, Cigna and UnitedHealth (all of whom operate PBMs or insurance companies) fell by 24% each.
UnitedHealth was the Dow’s most important component before the recent decline. With a share price of $610 it had the highest stock value. The Dow index is price-weighted. This means that the more a stock’s price increases, the greater its influence on the Dow. The S&P 500 and Nasdaq, meanwhile, are capitalization-weighted and give more influence to companies with greater market values.
Nvidia's Addition to Dow Also Pulls Index Lower
UnitedHealth isn’t the only Dow laggard this month. Nvidia, which was added to the index of blue-chip stocks in November early this year, has declined in every trading session except one since December 4. Stocks, perhaps influenced by news of an investigation into anti-monopoly practices in China or the rise of Broadcom (AVGO), have entered a period of technical correction this week.
The Dow was on track to snap its losing streak on Wednesday before the Federal Reserve's interest rate projections sparked a broad sell-off. Nvidia fell by 1.1% after moving up more than 3.0% in the mid-day session. UnitedHealth Group, along with CVS and Cigna, was the only Dow component to finish in green.
Update—December 18, 2024: This article was updated to reflect stock prices and index levels as of the market close on Wednesday.
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