Wall Street busted through its latest milestone Tuesday, when the Dow Jones Industrial Average topped 30,000 for the first time.

It’s an attention-grabbing psychological threshold, and it’s an encouraging signal that the market’s rally is broadening beyond the handful of stocks that carried Wall Street through the pandemic. But the Dow at 30,000 means less to most investors’ 401(k) accounts than the fact that broader market indexes are also at record highs.

Here’s a look at how the Dow has rallied to its latest multiple of 10,000, the first time that’s happened since January 2017, and what it means for investors.

What is the Dow, exactly?

It’s a measure of 30 companies, mostly blue-chip stocks spread across a range of industries. They include tech stars like Apple and Microsoft, as well as more traditional industrial companies like Boeing and Caterpillar. Other behemoths in the Dow include Nike and The Walt Disney Co.

Unlike many other measures of the market, the most important thing for the Dow is how big a stock’s price is, not how much a company is worth in total. That means a 1% move for UnitedHealth Group has a bigger effect on the Dow than the same movement for Apple, even though Apple is worth more than six times the insurer. That’s because UnitedHealth Group’s stock price is $337.51, versus $114.92 for Apple, due to having a smaller number of total shares.

How big a deal is the 30,000 mark?

It’s just an arbitrary number, and it doesn’t mean things are much better than when the Dow was at 29,999. What’s more impactful is that the Dow has finally clawed back all its losses from the pandemic and is once again reaching new heights. It is up 61.3% since dropping below 18,600 on March 23.

It took nearly nine months for the Dow to surpass the record it had set in February, before panic about the coronavirus triggered the market’s breathtaking sell-off.

What got the Dow this high?

The Dow’s rocket ride to 30,000 got big boosts from the Federal Reserve, which slashed short-term interest rates back to roughly zero and took other measures to stabilize financial markets, and Congress, which came through with trillions of dollars of financial aid for the economy.

The economy has improved since the pandemic’s initial shock. For instance, claims for unemployment benefits dropped from 6.9 million in March to 742,000 last week. Company profits didn’t tank as much as initially feared. And the possibility that a COVID vaccine could begin distribution by the end of the year has recently given the market more reason to be optimistic.

Among individual companies, Apple did much of the heavy lifting early in the Dow’s recovery after its price soared nearly $275 to above $500 by late August. A four-for-one stock split on Aug. 28 cut Apple’s stock price below $130, diminishing its impact on the Dow, even though its total market value continued to rise.

Since then, Honeywell and Caterpillar have provided the biggest boosts to the Dow as expectations have built for a recovering economy.

Looking over the longer term, profits strengthened sharply for most Dow companies since it first rose above the 20,000 threshold at the start of 2017. At American Express, for example, analysts expect earnings per share to bounce back from the pandemic and tally $6.69 next year, versus $6.07 in recurring earnings in 2016.

At the same time, investors today are more willing to pay higher prices for each $1 of earnings because alternatives are less attractive. The yield on the 10-year Treasury Tuesday was 0.88% compared with 2.5% in January 2017.

So this means my 401(k) is doing better?

Probably, but not because the Dow is at 30,000. For most 401(k) accounts, what matters much more is how the S&P 500 is performing. That’s because many, many more stock funds either directly mimic the S&P 500 or benchmark themselves against that index than the Dow.

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By Richard Moran

Richard Moran loves to write about sports with the Golden State Online. Before that, he worked as a senior writer at ESPN. Richard grew up in San Diego and graduated from the University of San Diego in 2004, after which he worked as an editor for five years.

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