By Laura Mandaro

The sudden contraction in U.S. consumer spending and global liquidity that brought some of America's most revered companies to their knees has made the Dow Jones Industrial Average - meant to represent the country's leading companies - more an index of laggards.

Year-to-date, the index of 30 large and established companies (DJI) has fallen 5%. The S&P 500 (SPX), made up of a wider variety of large-capitalization and some younger companies, is about flat.

The broader Wilshire 5000 has gained 1.6%. And the more growth- and tech-oriented Nasdaq Composite (RIXF) index has rallied 14%.

Steep slides in General Motors Corp. (US-GM) and Citigroup, Inc. (C) shares weighed on the Dow's performance earlier this year. They've since left the index.

But even with new entrants Travelers Cos. (TRV) and Cisco Systems (CSCO), the Dow may fail to catch up as a recovering economy favors smaller companies that that don't sell much of their wares overseas.

"We think the recession is ending right here and the resumption of growth will disproportionally benefit smaller capitalization companies," said Phil Orlando, chief equity strategist at Federated Investors, which manages about $409 billion.

Plus, he anticipates that U.S. dollar has ended its slide and will strengthen versus the euro. A stronger dollar puts more domestic-oriented companies at the advantage to larger multinationals - the type of companies like McDonald's Corp. (MCD) and General Electric Co. (GE) that make up the Dow.

Unless they're struggling against huge job losses, plunging industrial output and a historic credit squeeze, multinationals tend to benefit when the dollar slips.

"If we're right that the dollar will strengthen over the next year, that's not great for large-capitalization companies," Orlando said.

On Thursday, all U.S. benchmarks fell after the U.S. Labor Department's June jobs report showed a steeper drop in jobs than economists were expecting.

The Dow industrials fell 166 points, or 2%, to 8,338. The S&P 500 sank 19 points, or 2.1%, to 904 points. The Nasdaq Composite lost 43 points, or 2.3%, to 1,803.