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On Wednesday, it closed at $569. Because of how the Dow is calculated, Apple would dwarf the other stocks in the average and distort the Dow from its purpose — which is to reflect the broad economy, not represent the hottest stocks.
A big one-day gain by Apple, like a $50 jump after it reported blockbuster earnings last month, would send the Dow higher by hundreds of points. Similarly, a big drop would suggest the market was in more trouble than it really was.
The Dow is weighted so that a $1 move by any stock, no matter how cheap or expensive, moves the average the same — about seven and a half points as the Dow is calculated today.
Because it's much easier for a $100 stock to move $1 than it is for a $20 stock, higher-priced stocks carry more importance. IBM , at about $200, is the most expensive stock and carries nearly 12 percent of the Dow's weight.
Apple would carry a quarter or more, depending on which stock it replaced. That is why the Dow would be thousands of points higher if it had welcomed Apple in 2009: Each share of Apple has grown by hundreds of dollars since then.
"It wouldn't be the Dow Jones Industrial Average," says Nicholas Colas, chief market strategist at ConvergEx Group. "It would be the Apple Plus Some Other Stuff Index."
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