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The Dow just crossed 40,000 for the first time. The number is big but means little for your 401(k)

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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.

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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.

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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.

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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

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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%.

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Ukraine's Zelenskyy is expected in Normandy for commemorations of 80 years since D-Day, Macron says

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Ukraine's Zelenskyy is expected in Normandy for commemorations of 80 years since D-Day, Macron says

French President Emmanuel Macron said Tuesday he will greet Ukrainian President Volodymyr Zelenskyy along with other world leaders in Normandy for the 80th anniversary commemorations of D-Day.

President Joe Biden is also scheduled to attend this year’s commemorations of the landings that led to the liberation of France and Europe from Nazi Germany’s occupation.

BIDEN MISSING UPCOMING UKRAINE TALKS WOULD BE ‘APPLAUDED’ BY PUTIN, ZELENSKYY SAYS

Dozens of World War II veterans are expected to return, many perhaps for the last time, to Normandy’s beaches.

French President Emmanuel Macron shows a map during a press conference at the German government guest house in Meseberg, north of Berlin, Germany, Tuesday, May 28, 2024. (AP Photo/Ebrahim Noroozi)

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An international ceremony at Omaha Beach will honor the nearly 160,000 troops from Britain, the United States, Canada and other nations that landed in Normandy on June 6, 1944.

Macron said during a visit to Meseberg, Germany, on Tuesday that he will elaborate on Paris’ support for Ukraine next week, when Zelenskyy visits for the D-Day events.

France will “do whatever is necessary for as long as it is necessary” to support Ukraine, he said.

Canada’s Prime Minister Justin Trudeau is also to attend the D-Day commemorations.

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Britain’s King Charles III, who continues to be treated for cancer, also plans to travel to France for the British ceremonies, while skipping the international ceremony. The Prince of Wales will instead stand in for the king at Omaha Beach.

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Former spy chief expected to be new prime minister of the Netherlands

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Former spy chief expected to be new prime minister of the Netherlands

It has taken months of post-election negotiations to form a right-wing government.

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A former spy chief was tipped as the new Prime Minister of the Netherlands.

Former head of the Dutch spy agency and counter-terrorism office Dick Schoof was tipped on Tuesday to become the nation’s new Prime Minister.

The 67-year-old will lead a coalition dominated by Geert Wilders’ radical right-wing Freedom Party.

The coalition is also made up of the centre-right People’s Party for Freedom and Democracy, centrist New Social Contract and the Farmer-Citizen Movement.

Schoof is currently the top civil servant at the Ministry of Security and Justice.

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Wilders congratulated him in a post on X, saying he “has a great track record, is non-partisan and therefore above the parites, has integrity and is also very likeable.”

Anti-Islam firebrand Wilders, who topped the polls in last year’s elections, struck a deal with the other party leaders earlier this month – capping months of negotiations that left it unclear who would become the new Dutch prime minister.

The new agreement, framed with the slogan “Hope, courage and pride”, includes plans to impose strict measures on asylum seekers, scrap family reunification for refugees and reduce the number of international students studying in the country.

At one point, the 26-page document says the government will seek to “deport people without a valid residence permit as much as possible, even forcibly”.

Wilders’s preferred candidate for prime minister withdrew last week following allegations he had been involved in medical patent fraud.

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South Africa's ANC support around 42% days before election, poll finds

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South Africa's ANC support around 42% days before election, poll finds
Support for South Africa’s governing African National Congress (ANC) has settled around 42% in the days leading up to Wednesday’s election, an opinion poll showed, suggesting that an increase in support seen earlier this month has fizzled out.
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