The Strategist

Dow Jones composition will change significantly for the first time in seven years

08/25/2020 - 12:02

Exxon Mobil Corp., Pfizer Inc. and Raytheon Technologies Corp. will be derived from the Dow Jones Industrial Average stock index as part of the largest revision of its composition in seven years.

Instead, from August 31, the Dow Jones will include papers of the cloud services developer, biopharmaceutical company Amgen Inc. and the industrial and technological corporation Honeywell International.

The revision of is due to the announced decision of Apple Inc. to split stocks 4: 1, according to the S&P Dow Jones Indices, which calculates the stock index.

With the more pricey papers having higher weights in the Dow Jones, a split in Appleā€™s stock would have reduced the weight of tech companies in the index if S&P Dow Jones had not changed its composition. The inclusion of, Amgen and Honeywell in the calculation will offset the impact of Apple's decision, S&P Dow Jones said.

The changes will also help diversify the Dow Jones to include companies from industries not yet represented in the index, which "will better reflect the US economy," S&P Dow Jones said.

Changes in the composition of the index will not affect its value. At the close of the market on Monday, the Dow Jones value was 28,308.46 points, since the beginning of 2020 it has decreased by 0.81%.

The Dow Jones, which includes 30 stocks, has a 124-year history. Its last major roster change was seven years ago, when Visa, Goldman Sachs and Nike were added to replace Bank of America, Hewlett-Packard Co. and Alcoa.