The Dow Jones Industrial Average Falls to Last Place

Meta Platforms (Meta) reported earnings this week with revenue of more than $32 billion, beating expectations (operating income fell short), announced a $40 billion share buyback, and emphasized more efficient operations, helping drive the Nasdaq higher.

This was a stark contrast to Snap (SNAP), mentioned in Why Snapchat’s earnings disappointed: AI, whose share price plunged after its earnings release.

Meta’s better-than-expected revenue and its shareholder-friendly capital allocation were enough to pull the Nasdaq index upward, and overall this week we can say the financial environment was largely favorable for investors.

Of course, Meta employees are reacting by saying, “They laid off all those people just to hand the money over to Wall Street.” It is, in a way, a very American corporate move that puts shareholders above everyone else.

The Nasdaq rose 3.35%, seemingly leading the four major indices, but the small- and mid-cap–focused Russell 2000 finished the week out in front with a 3.92% gain.

The S&P 500 posted a middling performance with a 1.63% gain, while the Dow Jones Industrial Average was the only one of the four major indices to finish in negative territory, down 0.17% for the week.

This is the opposite of last year, when the Dow Jones Industrial Average was the only index to hold up relatively well; this year, the Dow alone is struggling badly.

Year-to-date, the Nasdaq is up 15% and the S&P 500 is up 7.8%, while the Dow has managed a gain of only 2.3%.

Regardless of China’s reopening policy, energy (-5.75%) fell deeply into negative territory along with oil prices. Utilities (-1.45%), healthcare (-0.11%), and consumer staples (+0.74%), which had held up relatively well last year, are having a rough start to the new year, and that pattern continued this week.

In contrast, communication services (+5.21%), the poster child for last year’s dismal performance, again delivered the strongest returns this week. Information technology (+3.72%) and consumer discretionary (+2.33%) also performed well.

Looking at the communication services sector, which is up 21.2% so far this year, it is clear that the market is still buying what is cheap and pushing it up, rather than establishing a new group of clear market leaders.