Monday, March 02, 2009

How the Dow Can Drop to 4404 with 23 of the Dow Stocks Not Dropping

A few days ago, I wrote about how the stock market as measured by the Dow Jones Industrial Average could drop to 3966 based on the drop in real estate (my own personal real estate that is). I started wondering, what would the 30 stocks in the Dow need to sell for in order for the Dow to trade at that level.

So what would have to happen to the 30 stock prices? Here is what I found. If just seven of the Dow stocks dropped to $15 a share and the other 23 stocks remained unchanged, then the Dow would drop to 4404. The seven stocks that would need to drop to 15 are:
Chevron Corporation (CVX)
McDonald's (MCD)
3M (MMM)
Procter & Gamble (PG)
Walmart (WMT)
ExxonMobil (XOM)
Remember, this is assuming that the other 23 stocks don't drop at all!

I developed a Dow Jones Industrial Average Analyzer which allows you to do what-if's on prices of the 30 stocks in the Dow. The Analyzer can be accessed at The Dow Jones Industrial Average is a price weighted index, using a scaled average which takes into account the stock dividends and stock splits. If you have your own opinion about what each of the 30 stocks could drop to, you can download the Dow Analyzer Excel spreadsheet at, and enter your own prices to see what the Index would end up at, since all the calculations to create the index are already set up for you.


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