MICROSOFT IS UP 10%: Here's what a one-point move in MSFT does to the Dow

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

At $US53.32, MSFT is up $US5.28, or 11%, since Thursday’s market close. That’s adding 35.27 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)

MSFT is up $US5.28. So:

5.28 x 6.6810 = 35.27 points

Its recent price makes MSFT the 23nd-most influential stock in the Dow, which means it has very little influence on the index. That’s a source of controversy because at $US384 billion, it’s the second largest company by market cap behind Apple.

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

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