The Dow Jones Industrial Average (Dow), one of the most widely recognized stock market benchmarks, recently experienced its longest winning streak in 36 years, with 13 consecutive sessions of positive closes. This surge indicated that Wall Street’s tech-driven rally was broadening to include a more diverse section of the stock market. While the S&P 500 remains the preferred benchmark for many investment professionals due to its extensive coverage of over 500 stocks, the Dow’s daily movements are often quoted in news media, giving it widespread recognition among Americans.

The recent rally in the Dow can be attributed to several factors. Traders widely believed that the U.S. Federal Reserve’s decision to implement a 25 basis point rate hike marked the end of its campaign to control inflation. This move was met with optimism from investors who also expressed confidence in the U.S. economy’s ability to avoid a recession.

Despite its impressive streak, the Dow has lagged behind other main Wall Street indexes throughout 2023. While the Dow posted a year-to-date increase of 7%, the S&P 500 surged by 18%, and the Nasdaq, driven by major winners like Tesla, Meta Platforms, Nvidia, and Amazon, recorded an impressive 35% gain. Market experts saw the Dow’s recent surge as a “catch-up trade” aimed at bringing the index to a healthier position in the market.

A significant contributing factor to the Dow’s success was the performance of its key constituents. Companies such as Salesforce, Apple, and Microsoft rallied between 40% and 70% during the year, emerging as the Dow’s top performers. However, the index’s lackluster performance was due to declines of 10% or more in stocks like Amgen, Chevron, Verizon Communications, and Walgreen Boots Alliance. Despite the overall positive performance in July, nearly half of the Dow constituents remained in the negative territory for the year.

The divergence in performance between the Dow and other major indexes highlights a broader shift in the market towards companies focused on artificial intelligence and innovation. The Dow’s 30 constituents did not include some major winners in the 2023 stock market rally, such as Tesla, Meta Platforms, Nvidia, and Amazon. These companies, fueled by optimism about artificial intelligence advancements and the anticipation of an end to the Federal Reserve’s rate hikes, were among the driving forces behind the gains observed in other indexes, particularly the Nasdaq.

Amid the winning streak, it’s important to note that the Dow’s overall strength was not exceptional compared to the Nasdaq and S&P 500. Since July 7, the Dow had climbed 4.8%, while the Nasdaq and S&P 500 recorded increases of 3.1% and 3.4% respectively.

In conclusion, the Dow Jones Industrial Average’s recent winning streak reflects a broader shift in the market towards embracing technology and innovation. While the index’s performance has been noteworthy, it has lagged behind other major indexes driven by companies in the tech sector. The Federal Reserve’s rate hike, deemed the last in its campaign, and a positive economic outlook have contributed to the Dow’s recent surge. However, the market’s inclusion of more diverse companies indicates a move away from traditional heavyweights towards those at the forefront of artificial intelligence and cutting-edge technologies. As the landscape of Wall Street continues to evolve, investors will closely monitor the Dow’s performance and the growing influence of tech-driven companies on the stock market.