The Dow Jones Industrial Average will see a handful of important changes take effect Monday morning but it is, perhaps, the change to how it is calculated...
The Dow Jones Industrial Average will see a handful of important changes take effect Monday morning, but it is, perhaps, the change to how it is calculated that will be the most important for Wall Street over the near term.
The move is at least partly precipitated by Apple Inc.’s AAPL, +4.13% fifth stock split in its 40 years as a publicly traded company. Apple’s 4-for-1 stock split set off a cascade of changes by the owners of the blue-chip benchmark, S&P Dow Jones Indices, which added Salesforce.com Inc. CRM, +0.26%, Amgen Inc. AMGN, +0.07% and Honeywell International Inc. HON, -1.61% to the index, replacing iconic Exxon Mobil Corp. XOM, -1.79%, Pfizer Inc. PFE, -0.30% and Raytheon Technologies Corp. RTX, -1.
Apple’s stock split also may have provided an opportunity for the Dow’s managers to readjust the 124-year equity gauge to better reflect the rapid rise of technology in the broader market in the face of the COVID-19 pandemic. Apple’s split shrinks the weighting of formerly the most important Dow member, to 3% from around 12%, and the overall technology representation in the index to around 20% from 27%. .
S&P Dow Indices explained the overall thinking of altering the divisor as significant in “the index’s ability to provide a continuous measure of market valuation when faced with changes to the stocks included in the index.”
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