* Caterpillar ranks as best YTD performer on the Dow
* Latest entries to the index are negative for the year;
Alcoa, booted, soars
* Dow's performance lags S&P 500, Nasdaq, Wilshire 5000
By Rodrigo Campos
NEW YORK, July 3 Wall Street on Thursday
celebrated its love of zeros - the ones that come after commas,
that is - as the Dow Jones Industrial Average topped the 17,000
mark for the first time.
The natural appeal of round numbers notwithstanding, the
attention to the Dow as it crosses this latest milestone
highlights not only the resilience of the current bull market
but also the less-than-stellar relative performance of blue chip
stocks this year. The Dow is up less than 3 percent so
far this year, while broader measures of U.S. stocks such as the
S&P 500 or Wilshire 5000 are up around 7
As an index, the Dow is overlooked by many Wall Street
insiders that consider it out of date, since its price-weighted
construction has kept companies like Apple and Google
- recent engines of growth and the new all-American
staples - on the sidelines.
About $13 billion is benchmarked globally to the Dow
compared with $1.575 trillion to the S&P 500, according to S&P
Dow Jones Indices data through 2012, the most up-to-date. But
even as Wall Street looks elsewhere to measure performance, the
Dow has retained a broad appeal for the occasional investor.
"When we make noise at round numbers it's for obvious
reasons. It's a milepost, it gets attention not just from the
folks that watch this on a minute-to-minute basis, but also from
Main Street and that's why it's important," said Art Hogan,
chief market strategist at Wunderlich Securities in New York.
"But it is up less than half of the move the S&P 500 or the
Nasdaq have made. It's a different kind of index so if you have
two, three large-cap names that aren't performing well, like
Visa or IBM that have large stock prices, that's going to drag
Had it tracked the 7.2 percent year-to-date gain on the S&P
500, the blue-chip index would be trading above 17,700.
At the close on Wednesday only eight of the Dow's 30
components were outperforming the S&P 500 this year, while 11
were posting negative year-to-date readings.
Three of those in the red for the year are the index's
newest additions, blue-chips since last September: Nike,
Goldman Sachs and Visa.
Meanwhile, Bank of America, Alcoa and
Hewlett-Packard, the three stocks that were booted from
the index last year, are all up for the year with HP up 21
percent and Alcoa up 40 percent.
With the index at record highs, it certainly is not all bad
news for the blue-chips. Caterpillar, the best performer
so far this year, has gained 21 percent in 2014 and is on track
for its best performance since 2010.
The record "is a powerful reinforcement to people on the
sidelines that this is the strongest bull market they will see
in their lifetime and many have missed it," said Craig Callahan,
CEO of Icon Funds in Denver, Colorado.
Three healthcare companies (Merck, Johnson & Johnson
, and UnitedHealth Group ) rank among those
beating the S&P this year, helped by the higher prices in a
sector that has more than $100 billion in completed and pending
mergers and acquisitions in 2014 in the U.S. alone.
"Healthcare is the tip of the M&A sword of late," said
Wunderlich's Hogan. "Large caps have been making extremely
interesting acquisitions, so that's part of it."
Intel and Microsoft are also among the
Dow's top performers in 2014, both breaking out to their highest
in more than a decade, as so-called "old technology" catches up
to the market rally.
Intel on Thursday hit $31.36, the highest since February
2004, and Microsoft is near last week's peak of $42.29, the
highest since April 2000. But while Intel is up around 160
percent from the lows of March 2009 and Microsoft has risen
about 180 percent, the S&P 500 has gained more than 190 percent
in roughly the same period.
"It may give people pause to think what could go wrong. I
wouldn't be anything more than vigilant," said John Manley,
chief equity strategist at Wells Fargo Funds Management in New
"This market is driven by fundamentals; 17,000 is a
psychological thing, probably not much more."
(Reporting by Rodrigo Campos; Editing by Meredith Mazzilli)