Key Takeaways
- As the S&P 500 and Nasdaq rose Tuesday, the Dow Jones Industrial Average fell 0.8%, dragged down by slumping UnitedHealth Group stock.
- UnitedHealth, one of the priciest stocks in the blue-chip Dow, tumbled nearly 20% Tuesday after reporting disappointing earnings.
- UnitedHealth stock shaved 422 points off the Dow, accounting for all of the index’s 409-point decline on Tuesday.
The Dow Jones Industrial Average missed out on a rally today thanks in large part to one very influential stock.
The Dow fell 0.8% Tuesday. Meanwhile, the S&P 500 and Nasdaq gained 0.4% and 0.9%, respectively, boosted by rising chip stocks and other AI infrastructure providers. But it wasn’t just roaring AI stocks lifting those indexes: The 30-component Dow was being dragged down Tuesday.
A familiar culprit was to blame. Shares of UnitedHealth Group (UNH) tumbled nearly 20%—they lost $69 each—after getting hit with a double whammy. Late Monday, Medicare administrators said payments to private Medicare Advantage plans will barely increase next year; this morning UnitedHealth forecast total revenue will decline this year as it scales back operations.
Why This Is Important
The Dow Jones Industrial Average is one of the most widely-followed measures of stock market performance. Its price-weighted methodology makes it an idiosyncratic gauge that can diverge sharply from the other major indexes due to big single-stock moves.
UnitedHealth’s slump was bad news for the price-weighted Dow, in which stocks with the highest nominal stock prices have the most impact on the index’s performance. By contrast, the capitalization-weighted S&P 500 and Nasdaq are more influenced by the companies with the largest market values.
With a stock price of $351.64 heading into today’s trading, UnitedHealth Group was the sixth-most expensive stock in the Dow, and thus the price-weighted index’s sixth-most influential component. In the end, today’s drop shaved about 422 points off the index.
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The Dow wasn’t helped by its most influential component, Goldman Sachs (GS), shares of which slipped 0.2% to about $930. Shares of Home Depot (HD) and American Express (AXP), two other companies with larger Dow weightings than UnitedHealth, both fell more than 1%.
Still, UnitedHealth alone pulled the Dow into the red on Tuesday, as its fall led to more lost points—the 422 mentioned above—than the 409 recorded by the index itself. (The Dow’s level is calculated by summing the daily price change of the index’s 30 stocks and dividing the total by the Dow Divisor.)
A similar dynamic played out several times last year, with UnitedHealth’s financial woes occasionally single-handedly tanking one of the most widely-cited gauges of stock market performance.
This article has been updated since it was first published to reflect closing prices for Tuesday.