On Thursday, the Dow Jones stock market index in the US hit a new record of 40,000 points. This was driven by speculation that the US Federal Reserve may cut interest rates soon. Just four months ago, in November 2020, the index had surpassed 30,000 for the first time. The Dow Jones is made up of the 30 largest listed companies in the USA, including Microsoft and Goldman Sachs.
Despite its age – it’s been around for over 128 years – the Dow Jones remains a closely watched index. However, it is often criticized for its method of weighting individual stocks based on share value. For example, health insurer UnitedHealth holds an 8.5 percent share of the overall index, while Amazon, one of the world’s largest companies in terms of market capitalization, only holds a three percent share.
On the same day as the Dow Jones’ record-breaking performance, both the S&P 500 and Nasdaq technology indices also reached new highs after rising steadily over previous days. These two indices use a different approach to weighting individual stocks – they are based on market capitalization instead of share value. The rise in all three indexes signals positive trends in the US stock market.
