Key Takeaways

The Dow Jones Industrial Average fell more than 500 points, or 1.3%, on Thursday, and one stock bore most of the blame: UnitedHealth Group ( UNH ).

Shares of UnitedHealth plummeted more than 22% after the health insurer cut its full-year earnings forecast , citing higher-than-expected costs. Meanwhile, more than two-thirds of the 30 stocks in the blue-chip Dow, one of the most commonly cited measures of U.S. stock market performance, closed higher Thursday. The S&P 500 was up 0.13% at the same time and the Nasdaq Composite —usually much more volatile than the Dow due to its preponderance of growth stocks—was marginally lower after yesterday's sell-off .

The Dow's dramatic underperformance on Thursday was a clear reflection of the index's unique methodology. The Dow is price-weighted , meaning the stocks with the highest share prices have the most influence on the index's performance. The S&P 500 and Nasdaq, on the other hand, are capitalization-weighted indexes that are more influenced by the companies with the highest market values, not the highest share prices.

UnitedHealth Group, with a closing price of $585.04 yesterday, was the highest-priced stock in the Dow and thus its most influential component. Goldman Sachs ( GS ), which closed at $499.05 yesterday, is the only Dow stock with a share price within $100 of UnitedHealth's. (With UnitedHealth’s losses on Thursday, Goldman could finish the week as the Dow's heftiest stock.)

Apple ( AAPL ), with a closing price of $194.27 yesterday, has a fraction of UnitedHealth's influence within the Dow. But the iPhone maker has 15 billion shares, and thus a market capitalization of nearly $3 trillion. UnitedHealth’s approximately 900 million shares put its market cap at Wednesday's close at $535 billion, meaning Apple stock has more than 5 times the weight in the S&P 500.

To be sure, UnitedHealth, the S&P 500's 14th-largest company heading into Thursday—still has a massive amount of influence within the S&P 500.

The selection committee that picks stocks for the Dow is cognizant of its peculiarities. Its price-weighted methodology, according to S&P Global, "has meant, over the years, that extremely high-priced stocks have not been included in The Dow." Investors often speculate that companies with high share prices split their stock in part to increase their chances of joining the Dow. In recent years, Amazon ( AMZN ) and Nvidia ( NVDA ) have both been added to the Dow in relatively short order after splitting their stocks, which had been trading at more than $1,000 per share.