📦Amazon Joins The Dow Jones!

🐺 Hi pack-mates,

This is Howling Markets, and despite not being founded in 1896 like the Dow, we cover centuries’ worth of financial news and interesting information!

Today we will be covering:

• Education: What Is the Dow Jones? 📈

• Ether Reaches $3,000 For the First Time in 2 Years 🤑

• Amazone Joins the Dow Jones! 📦

• Equity and Debt Markets Daily Update ⚖️

• And more!

Market Watch 👀

What is The Dow Jones?

The Dow Jones Industrial Average (DJIA), or Dow for short, is one of the oldest US market indexes that has served as a staple for the US economy for almost 130 years.

The Dow Jones was created in 1896 by Charles Dow and Edward Jones and it was initially composed by 12 American stocks, mainly active in the railway and tobacco sector. Then, in 1916 the index was expanded to 20 stocks and later, in 1928, to 30 names.

Nowadays, the “Dow 30” contains 30 blue chip stocks listed either on the New York Stock Exchange (NYSE) or on the Nasdaq and it is regarded as one of the most popular market indexes. However, because it only consists of 30 companies, most investors looking to grasp a wider picture will often look at the S&P 500 or the Russel 2000.

The Dow is an extremely particular index, not only for its story, but also for how it is calculated. The DJIA is a price-weighted index which, as opposed to the more common market cap-weighted alternative, gives more importance to the price of the stock than the actual size of the company.

Because of this, the price of this index is calculated by simply summing the share prices of its components and then dividing the result for the “Dow Divisor”, which is simply a coefficient used to improve the simple sum of the prices.

However, most interestingly, the Dow also has another unique feature, as opposed to other major indexes. The components of the S&P 500 are automatically chosen based on their market capitalization. If your capitalization falls below the 500^th stock in the US market, you would be removed from the S&P 500.

On the other hand, because the Dow is not a market capitalization-weighted index, there is a committee which decides which stocks should be added and which stocks should be dropped from the index.

Ether Reaches $3,000 For the First Time in 2 Years

Ethereum has started to gain some traction trailing Bitcoin’s exceptional performance. Since the beginning of 2024, Ethereum has gained over 32% and on Tuesday it closed over $3,000 for the first time since the beginning of 2022.

However, such an exceptional performance cannot be deemed the simple result of the crypto optimism generated by Bitcoin, as there are many great news going on for this amazing network.

First of all, the Ethereum 2.0 upgrade is almost complete, which would transform the network from Proof-of-Work (PoW) to Proof-of-Stake (PoS), reducing transaction fees and delays while improving efficiency and scalability.

Additionally, since the launch of Bitcoin’s spot ETFs, the rumor of Ethereum’s has been spreading. Over the past months there has already been some correspondence between prospect ETFs and the SEC, however all previous proposals had been sent back for revisions.

Now, the next approval deadline is the 23^rd of May and many investors believe that there is an extremely high chance that ETH’s Spot ETFs will be approved.

Today’s Howling Question

And now, it is time for our howling question!

We often talk about the performance of the S&P 500, but what about the Dow? How much did Dow’s price change since the beginning of 2023?

a)  -5%

b) -1%

c)  +5%

d)  +16%

e)  +22%

Try to answer the question by yourself, and then check the correct answer after the last interesting news!

Amazon Joins the Dow Jones!

As previously mentioned in the first section of the newsletter, the components of the Dow are not chosen based on a series of parameters, but rather they are selected based on their influence on the current market trend. Of course, market capitalization plays a role, but the 30 stocks in the Dow are not the 30 largest stocks in the US market.

On Tuesday it was announced that starting next Monday, Amazon (Ticker: AMZN) will officially join the Dow Jones Industrial Average, replacing Walgreens Boots Alliance (Ticker: WBA).

Walgreens is a healthcare and retail pharmacy services provider which joined the Dow in 2018, by replacing General Electric (Ticker: GE), and which had a great performance between 2010 and 2016. However, since the all-time high, the company has suffered a significant loss which caused them to cancel their quarterly dividend payment at the end of 2023.

Since 2016, Walgreens Boots Alliance has lost more than 75% of its value.

Additionally, the S&P Dow Jones Indices, the committee that decided which companies should be in the Dow, commented that these important changes in the composition were mainly driven by Walmart’s stock split, set to take place next Monday as well.

Stock splits usually do not have any impact on the shareholders, on the company and not even on indexes, but because the Dow is price-weighted, Walmart’s 3:1 split will bring some important changes.

A 3:1 split means that every share of the company will be divided into three, dropping the share price to 1/3 of the current level. Because of this reduction in share price, Walmart will fall from the 17^th to the 26^th place in the Dow, leaving its previous spot to Amazon.

Additionally, Amazon will be one of the few companies in the Dow which does not pay any dividends, only accompanied by Boeing and Salesforce.

Equity and Debt Markets Update

And now, our daily markets update!

Tuesday was an extremely volatile day for the stock market, with the price falling by more than 1% during the trading session, before slightly recovering and closing -0.6%. This volatility was caused by big market movers, such as Nvidia, which incurred significant losses ahead of their earnings announcements set to take place on Wednesday.

Likewise, bond yield also slid down during Tuesday’s trading session. The benchmark 10-year US government bond yield fell by -0.32%, while still remaining above the 4.2% level.

Answer

The correct answer is d) +16%

Since the beginning of 2023 the Dow 30 has gained 16.32%, lagging significantly behind the almost 30% returned by the S&P 500. However, this discrepancy can be explained by the fact that the Dow 30 contains a much lower amount of tech and AI companies which have been driving the S&P 500’s price to the moon.

Howl-Worthy Memes 😂

🐺 See you next time!

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