One particular stock is responsible for the Dow's sharp decline on Tuesday. Discover the reason—and identify the stock in question

Main Highlights

• The Dow Jones Industrial Average dropped close to 1% on Tuesday afternoon, largely due to a sharp decline in UnitedHealth Group shares.

• UnitedHealth, one of the highest-priced stocks in the Dow, plummeted by nearly 20% after releasing earnings that fell short of expectations.

The Dow Jones Industrial Average missed out on today's market rally, primarily because of the significant impact of a single stock.

While the Dow slipped almost 1% in recent trades, the S&P 500 and Nasdaq rose by 0.4% and 0.9%, respectively, buoyed by gains in semiconductor and AI infrastructure companies. However, the Dow, with its 30 components, was weighed down on Tuesday.

The main factor behind this downturn was a familiar one.

Significance of the Dow's Movement

The Dow Jones Industrial Average is a key barometer for the stock market. Its unique price-weighted calculation means that large price swings in a single high-priced stock can cause the index to move differently from other major benchmarks.

UnitedHealth Group (UNH) shares plunged nearly 20% following a double setback. Late Monday, Medicare officials announced that payments to private Medicare Advantage plans would see only minimal increases next year. The following morning, UnitedHealth projected a decline in total revenue for the year as it reduces its operations.

This steep drop in UnitedHealth's stock had a pronounced effect on the price-weighted Dow, where stocks with higher share prices exert greater influence on the index's performance. In contrast, the market-cap weighted S&P 500 and Nasdaq are more affected by companies with the largest overall market values.

With a share price of $351.64, UnitedHealth Group ranked as the sixth most expensive stock in the Dow, making it the sixth most impactful on the index as of Tuesday.

The Dow also faced pressure from its most influential stock, Goldman Sachs (GS), which was down over 1% at around $920. Home Depot (HD) and American Express (AXP), both of which carry more weight in the Dow than UnitedHealth, also saw their shares fall by more than 1%.

This pattern has emerged several times over the past year, with UnitedHealth's financial troubles at times single-handedly dragging down one of the most closely watched stock market indexes.