Key Highlights

● Dow futures were up 9 points at 52,521 while Nasdaq-100 futures fell 2.62%.

● The Dow is price-weighted with 30 stocks, so Intel's drop has no direct effect.

● The Dow gained 2.82% in October through Thursday, against 0.90% for the S&P 500.

● Apple's results on Monday after the close are the next test for cap-weighted indexes.

Friday's pre-market numbers look like they come from different markets. Around 8 a.m. ET, market quotes had Dow futures up 9 points at 52,521, while S&P 500 futures were down 1.13% and Nasdaq-100 futures down 2.62%. The difference comes down to how each index is built.

The S&P 500 and Nasdaq-100 are weighted by market value. The largest companies, including Nvidia (NASDAQ:NVDA), Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Meta (NASDAQ:META) and Broadcom (NASDAQ:AVGO), account for a large share of each index's moves. When AI and chip stocks fall together, as they are this morning after Intel (NASDAQ:INTC)'s guidance and Amazon's cash-burn news, those indexes take a direct hit.

The Dow Jones Industrial Average works differently. It holds only 30 stocks and is weighted by share price, not market value. A $1 move in any member has the same impact regardless of the company's size. Big tech is represented, but no single giant dominates, and the index has a heavier tilt toward industrials, health care, financials and consumer names.

Who's in and who's out

Index changes matter here. Intel was removed from the Dow in November 2024 and replaced by Nvidia. So Intel's roughly 25% pre-market drop has no direct effect on the Dow. Amazon joined the Dow in 2024, and its share price near $244 before Thursday's report gives it only a modest weight. Chevron (NYSE:CVX), a Dow member, was up about 1.70% pre-market after beating estimates. Exxon Mobil (NYSE:XOM), which left the Dow in 2020, helps the S&P 500 but not the Blue-Chip index.

Price weighting can also hurt the Dow. On Thursday, 23 of the Dow's 30 members rose, yet the index fell 0.25%. That was partly because Caterpillar (NYSE:CAT), one of its highest-priced stocks, dropped about 9% after keeping its sales forecast, according to media reports. One expensive stock can outweigh many smaller gains.

Equal weight tells the real story

For a broader view, look at the equal-weight S&P 500, which gives each member the same weight. Through Oct. 27, the Invesco S&P 500 Equal Weight ETF (RSP) was up 4.57% for October, compared with 0.92% for SPY and a 2.50% loss for QQQ, according to one report. A market newsletter cited in the same report estimated that the "S&P 500 ex-AI" outperformed the full index by about 6.4 points this month. That's a private measure, not an official index.

Based on closing levels, the Dow was up 2.82% for October through Thursday, compared with 0.90% for the S&P 500 and a 2.52% loss for the Nasdaq Composite. The typical stock is having a much better month than the cap-weighted headline suggests. Thursday showed the same pattern, with 9 of 11 S&P sectors up and NYSE advancers leading decliners by almost 2 to 1, even as the S&P 500 slipped.

The counterargument is that concentration works both ways. The same megacaps dragging the S&P 500 today drove most of its gains in earlier years. A rebound in AI stocks could quickly flip the gap. Cap-weighted indexes also reflect where most investor money is actually held.

Watch the breadth numbers at the open. If the Dow and equal-weight measures hold up while the Nasdaq falls, the rotation is still in place. If selling spreads to health care, energy and industrials, the divergence would narrow, and not in a good way. Apple's results on Monday after the close will be the next big test for cap-weighted indexes. Because Apple is a large weight in the S&P 500 and Nasdaq-100 and a Dow component as well, its report could narrow the gap between the indexes or widen it.