World
The Dow just crossed 40,000 for the first time. The number is big but means little for your 401(k)
NEW YORK (AP) — The Dow Jones Industrial Average just topped 40,000 for the first time, the latest pop in what’s been a surprisingly good year for Wall Street.
But just like New Year’s represents an arbitrary point in time in the Earth’s revolution around the sun, such milestones for the Dow don’t mean that much inherently.
For one, with just 30 companies, the Dow represents a tiny slice of Corporate America. For another, almost no one’s 401(k) account sees its performance depend on the Dow, which has become more of a relic used for historical comparisons.
Here’s a look at what the Dow is, how it got here and how its use among investors is on the wane:
WHAT IS THE DOW?
It’s a measure of 30 established, well-known companies. These stocks are sometimes known as “blue chips,” which are supposed to be on the steadier and safer side of Wall Street.
WHAT’S IN THE DOW?
Not just industrial companies like Caterpillar and Honeywell, despite the name.
The roster has changed many times since the Dow began in 1896 as the U.S. economy has transformed. Out, for example, was Standard Rope & Twine, and in recently have been big technology companies.
Apple, Intel and Microsoft are some of the newer-economy names currently in the Dow. The financial industry also has a healthy representation with American Express, Goldman Sachs, JPMorgan Chase and Travelers. So does health care with Amgen, Johnson & Johnson, Merck and UnitedHealth Group.
WHAT’S ALL THE HUBBUB NOW?
The Dow just crossed its latest 10,000 point threshold to top 40,000 briefly in midday trading on Thursday. It took about three and a half years to make the leap from 30,000 points, which it first crossed in November 2020.
It’s kept chugging mostly higher despite the worst inflation in decades, painfully high interest rates meant to get inflation under control and worries that high rates would make a recession inevitable for the U.S. economy.
Companies are now in the midst of reporting their best profit growth in nearly two years, and the economy has managed to avoid a recession, at least so far.
IS THE DOW THE MAIN MEASURE OF WALL STREET?
No. The Dow represents only a narrow slice of the economy. Professional investors tend to look at broader measures of the market, such as the S&P 500 index, which has nearly 17 times the number of companies within it.
More than $11.2 trillion in investments were benchmarked to the S&P 500 at the end of 2019, according to estimates from S&P Dow Jones Indices. That’s 350 times more than the $32 billion benchmarked to the Dow Jones Industrial Average.
Investors’ 401(k) accounts are much more likely to include an S&P 500 index fund than anything tied to the Dow. The S&P 500 crossed above its own milestone Wednesday, topping 5,300 points for the first time.
That’s what more investors care about. Well, 100-point milestones matter for the S&P 500 as little as others, but the fact that the S&P 500 is higher than ever matters a lot.
HOW DIFFERENT ARE THE DOW AND THE S&P 500?
Their performances have historically tracked relatively closely with each other, but the S&P 500 has been better recently. Its 29.3% rise for the last 12 months easily tops the 21.1% gain for the Dow.
That’s in part because the S&P 500 has more of an emphasis on Big Tech stocks, which were responsible for most of the S&P 500’s gains last year. Hopes for an easing of interest rates by the Federal Reserve and a frenzy around artificial-intelligence technology have pushed them to dizzying heights.
The Dow reflects none of the movements of such marquee stocks as Alphabet, Meta Platforms or Nvidia.
IS THAT IT?
No, the Dow and S&P 500 also take different approaches to measuring how an index should move.
The Dow gives more weight to stocks with higher price tags. That means stocks that add or subtract more dollars to their stock price push and pull it the most, such as UnitedHealth Group and its $523 stock price. A 1% move for that stock, which is about $5, packs a radically harder punch than a 1% move for Walmart, which is about 63 cents
The S&P 500, meanwhile, gives more weight to stocks depending on their overall size. That means a 1% move for Walmart carries more weight than a 1% move for UnitedHealth Group because Walmart is a slightly bigger company by total market value.
SO WHY CARE ABOUT THE DOW?
Because it’s so old, it has a longer track record than other measures of the market.
For a while, a triple-digit move for the Dow also offered an easy shorthand way to show the stock market was having a big day. Now, though, it means much less. A 100 point swing for the Dow means a move of less than 0.3%.
World
Biden and the first lady bring holiday cheer to patients and families at a children's hospital
WASHINGTON (AP) — President Joe Biden and his wife, Jill, brought some Christmastime cheer to patients and their families at a children’s hospital on Friday but a toddler in a light blue jumper entertained, too.
The president and first lady visited privately with patients and their families for photos at Children’s National Hospital before Jill Biden read “‘Twas the Night Before Christmas” to a group of patients in the atrium. As she read, the president, seated beside her in a matching red chair, played a game of catch with the toddler. Biden made faces at the child and at one point briefly got him to sit up on his chair.
“Reading and entertainment,” Jill Biden said after she finished reading. The audience laughed.
The president then asked permission to make a brief statement and sought to lift the children’s spirits, saying he knows it’s a “tough time” for them to be in the hospital.
“Keep the hope,” he said. “You’re in our prayers, you’re in our thoughts, and thank you for letting us join you.”
The visit continued a tradition, dating back to first lady Bess Truman, of presidents’ wives bringing holiday cheer to children who are too ill to be at home for Christmas.
President Biden has joined his wife on all four of her annual visits. It has not gone unnoticed.
“We’ve never had a president join for four years in a row straight, so you have set a high bar,” Michelle Riley-Brown, president and CEO of the hospital, told him.
World
Justin Trudeau looks set to lose power after key ally vows to topple him
Canadian Prime Minister Justin Trudeau on Friday looked set to lose power early next year after a key ally said he would move to bring down the minority Liberal government and trigger an election.
New Democratic Party leader Jagmeet Singh, who has been helping keep Trudeau in office, said he would present a formal motion of no-confidence after the House of Commons elected chamber returns from a winter break on Jan. 27.
NEWT GINGRICH SAYS TRUMP MAY HAVE ‘BROKEN’ TRUDEAU GOVERNMENT DURING HISTORIC TRANSITION PERIOD
If all the opposition parties back the motion, Trudeau will be out of office after more than nine years as prime minister and an election will take place.
A string of polls over the last 18 months show the Liberals, suffering from voter fatigue and anger over high prices and a housing crisis, would be badly defeated by the official opposition right-of-center Conservatives.
The New Democrats, who like the Liberals aim to attract the support of center-left voters, complain Trudeau is too beholden to big business.
“No matter who is leading the Liberal Party, this government’s time is up. We will put forward a clear motion of non-confidence in the next sitting of the House of Commons,” said Singh.
The leader of the Bloc Quebecois, a larger opposition party, promised to back the motion and said there was no scenario where Trudeau survived. The Conservatives have been calling for an election for months.
A few minutes after Singh issued his letter a smiling Trudeau, under growing pressure to quit after the shock resignation of his finance minister this week, presided over a cabinet shuffle.
Trudeau’s office was not immediately available for comment.
Votes on budgets and other spending are considered confidence measures. Additionally, the government must allocate a few days each session to opposition parties when they can unveil motions on any matter, including non-confidence.
Before Singh made his announcement, a source close to Trudeau said the prime minister would take the Christmas break to ponder his future and was unlikely to make any announcement before January.
Liberal leaders are elected by special conventions of party members, which take months to arrange.
Singh’s promise to act quickly means that even if Trudeau were to resign now, the Liberals could not find a new permanent leader in time for the next election. The party would then have to contest the vote with an interim leader, which has never happened before in Canada.
So far around 20 Liberal legislators are openly calling for Trudeau to step down but his cabinet has stayed loyal.
The timing of the crisis comes at a critical time, since U.S. President-elect Donald Trump is due to take office on Jan. 20 and is promising to impose a 25% tariff on all imports from Canada, which would badly hurt the economy.
The premiers of the 10 provinces, seeking to create a united approach to the tariffs, are complaining about what they call the chaos in Ottawa.
World
Italy's Deputy PM Salvini found not guilty in Open Arms migrants case
The leader of Italy’s right-wing Lega Party and Giorgia Meloni’s ally, Matteo Salvini, had been accused of kidnapping and dereliction of duty over his refusal to let a migrant rescue boat dock in Italy in 2019.
A court in Sicily found Italy’s Deputy Prime Minister Matteo Salvini not guilty of kidnap for detaining 100 migrants aboard a humanitarian rescue ship in 2019 incident when he was interior minister.
“I am happy. After three years, Lega has won, Italy has won. Defending the homeland is not a crime but a right. I will go forward with more determination than before,” Salvini said following the verdict.
In August 2019, an NGO ship called Open Arms was carrying 147 migrants from the Libyan coast when Salvini prevented it from docking on the Italian island of Lampedusa.
The Open Arms remained at sea for almost three weeks, with the NGO reporting those on board endured dire circumstances leading to medical emergencies and deteriorated mental health. Some threw themselves overboard, and several minors were evacuated during the standoff.
Eventually, the prosecutor in the Sicilian city of Agrigento, Luigi Patronaggio, ordered the vessel to be preventively seized after inspecting it. The remaining 89 people onboard were allowed to disembark.
Salvini, who leads the anti-migrant, Euroskeptic Lega party, has argued that the then-government of Giuseppe Conte backed him fully in his mission to “close the ports” of Italy to rescue ships carrying migrants found at sea.
Arriving at the courthouse on Friday morning, he said it was a beautiful day “because I am proud to have defended my country. I would do what I did again.”
Last week, he told a rally that “defending the borders, the dignity, the laws, the honour of a country cannot ever be a crime.”
Open Arms’ Italian lawyer, Arturo Salerni, has argued Salvini failed in his duty as a public official to protect the human rights of those on board the ship. Prosecutors during the trial say that those stranded at sea should have had their human rights protected over “state sovereignty.”
“A person stranded at sea must be saved and it is irrelevant whether they are classified as a migrant, a crewmember or a passenger,” Prosecutor Geri Ferrara told the court in September.
Meloni’s support
Salvini had said he would be unlikely to step down in the case of a guilty verdict over five years, which would have automatically barred him from office.
He has the support of Italian Prime Minister Giorgia Meloni, who earlier this year said in a post on X that “turning the duty to protect Italy’s borders from illegal immigration into a crime is a very serious precedent.”
She never indicated she would expect his resignation, but on Wednesday, she told the Italian Senate that Salvini has the “solidarity of the entire government”.
Meloni has moved to crack down on migration since taking power in 2022, striking deals with northern African countries in a bid to prevent migrants from departing and setting up a landmark scheme with Albanian leader Edi Rama to process asylum applications in so-called “return hubs” away from Italian soil.
The deal has gained traction across European member states, although it has since become a legal nightmare for Meloni after 24 asylum seekers who were sent to Albania were promptly sent back to Italy after a Roman court declared the scheme unlawful.
The standoff between Open Arms and Salvini was one of over 20 during his tenure as interior minister from 2018 to 2019, where he took a hardline stance against migration. At the time, he repeatedly closed Italian ports to humanitarian rescue ships and accused NGOs that rescued migrants of effectively encouraging human traffickers.
In one incident, now-MEP Carola Rackete entered the port of Lampedusa against Salvini’s orders after declaring a state of emergency on her boat.
She was soon arrested on charges of illegal migration that were eventually dropped.
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