CATERPILLAR'S PLUMMETING: Here's what a one-point move in CAT does to the Dow

Caterpillar is a member of the Dow Jones Industrial Average, the 30-stock index that aims to be representative of the US economy.

At $US64.80 right now, CAT is down $US5.40, or 7.7%, since Wednesday’s market close. That is taking 36.07 points off the Dow.

How’d we compute that?

The Dow is peculiar in that it is a price-weighted index, meaning stocks with the highest share prices have the most influence on the index’s movements.

According to The Wall Street Journal, the current Dow divisor is 0.149677, meaning a 1-point move in any Dow stock moves the Dow by 6.6810 points (the reciprocal of the divisor). So if you want to calculate how many points a Dow stock is adding to or subtracting from the Dow, use this formula:

(Dollar change in stock price) x 6.6810= (Point change in the Dow)

Apple is down $US5.40. So:

-5.40 x 6.6810 = -36.07 points

Its recent price makes Caterpillar the 19th-most influential stock in the Dow. Goldman Sachs, IBM, 3M, Boeing, and Apple all have higher share prices and thus have more influence on the Dow.

That’s pretty much all you need to know about that.

NOW WATCH: A lawyer in Florida has come up with an ingenious way for drivers to evade drunken-driving checkpoints

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.