Exxon Mobil Booted from the Dow After Close
Use the sharing tools found through the share button at the top or side of the articles. Copying articles to share with others is a violation of FT.com T & C and Copyright Policy.
S & P Dow Jones Indices wiped out two of the oldest constituents of the Dow Jones Industrial Average late Monday, saying it would replace ExxonMobil and Raytheon Technologies in its historic US blue-chip barometer.
The oil and industrial conglomerate were two of three companies ripped off the 30-strong index, along with drugmaker Pfizer, to allow for a reorganization brought about by Apple’s decision to split its shares.
They will be replaced by cloud software provider Salesforce, biotechnology company Amgen and industrial products conglomerate Honeywell International.
The changes will take effect before trading begins on August 31, at the same time as Apple’s four-by-one share split takes effect, a move that would otherwise drastically reduce the weight of tech companies within the Dow.
Unlike other S&P indices, where the weights of companies are related to their market capitalization, the Dow is calculated according to the share prices of its components. A rally in Apple shares this year had made it the most influential stock within the index, accounting for more than 12 percent of the Dow, but the share split will reduce the iPhone maker’s weight in the index to around 3 percent.
“The announced changes help offset that reduction,” said S&P Dow Jones Indices. “They also help diversify the index by removing overlap between companies of similar scope and adding new types of businesses that better reflect the U.S. economy.”
Salesforce has grown to become one of the largest software providers in the world, known for its cloud-based sales automation software, while Amgen’s rise reflects the rise of Biotechnology, pushing out a more traditional drugmaker.
For Charlotte-based Honeywell executives, for their part, inclusion in the Dow is a homecoming. The company was removed from the index in 2008. Before it was cut, it could trace its membership back to 1925.
Dow members have changed only rarely in recent years. While Apple added in 2015 and Nike and Goldman Sachs gained entry in 2013, most of the companies within the Dow on Monday had been on the index for more than 10 years.
Exxon’s disposal will leave the Dow with only one energy company in its cohort: Chevron. Exxon, known as Standard Oil of New Jersey before changing its name in 1972, was added to the index in 1928 when the Dow expanded to 30 out of 12 stocks.
Raytheon’s history with the Dow also goes back decades. The company changed its name to United Technologies in 1975 and finalized a merger with Raytheon this year, taking the name Raytheon Technologies.
While U.S. households have turned to the Dow Jones Industrial Average as an indicator of stock market performance, it relinquished its relevance in financial markets decades ago. Stock funds in the country are usually compared to the market capitalization-weighted S&P 500, which is managed by the same company that owns and calculates the Dow.
The additions later this month will make insurance provider UnitedHealth the largest component in the Dow, followed by the retailer Home Depot and Amgen.