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IBM Stock Falls: Effect on the Dow Jones Industrial Average

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Apr. 26 2016, Updated 1:07 p.m. ET

The March rally

As we’ve already seen, IBM (IBM) stock had one of its steepest declines in 2015 and started to rebound in February 2016. The stock touched its 52-week high in April 2016. A weakening dollar coupled with Morgan Stanley’s (MS) improved rating for IBM helped the stock rally in March.

March turned out to be good for several major technology stocks. The weakening dollar (UUP) supported Apple (AAPL), Microsoft (MSFT), Facebook (FB), and Intel (INTC), which rose 13.3%, 8.2%, 7.3%, and 10.5%, respectively.

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Dow Jones bore the brunt of IBM’s 1Q16 revenue decline

IBM’s recent fiscal 1Q16 results caused its stock to fall ~6%. It also cast black shadows on the DJIA (Dow Jones Industrial Average) index. The DJIA index is a price-weighted index in which IBM holds the third highest share price. It implies that the bigger the stock price, the larger the swing and the greater the influence the stock has on the index. The fall of IBM stock dragged down the Dow by 65 points on April 19, 2016.

According to the Wall Street Journal‘s Market Data Group, IBM stock has contributed negatively to the Dow in the past 16 earnings announcements. It has pulled the index into the red zone seven times.

After financial services and consumer services, the technology sector contributes the most toward the DJIA index.

Now let’s see why global IT spending is expected to fall and what the impact will be on IBM.

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