The Dow's Secret Weapon: Defense Old-Timers

The 30 arthritic, old prizefighters of the Dow Jones Industrial Average -- once widely derided as irrelevant, if not actually dead -- have bounded off the ropes to flatten their brash young rivals so far in 2002, rising 3% as a group through March 1, in contrast to the 8% decline of the Nasdaq Composite and the 1% decline of the S&P 500.

Powered by strength in the military-industrial complex, as you'll see in a moment, the knockout blow came in a February that was remarkable for its 11-percentage-point divergence between the returns of the Dow and the Nasdaq. That was the fourth-widest one-month differential, +2% for the Dow vs. -9% for the Nasdaq, since 1982. The three greater divergences all came in the past two years, and each led to one more month of sharp differential in the same direction, and then a month of reversal. (See the table below.)

In large part as a result of its bravura February, the cumulative performance of the Dow 30 has for the first time in a decade pushed into the lead over the Nasdaq and S&P 500 over every significant long-term period, starting with the day before last year's terror attack: ...