Index Component Restructuring Considering Apple Stock Split
ExxonMobil, a Mainstay Since 1928, Removed
Newly Included Stocks Rise Together...Removed Stocks Weaken
[Asia Economy New York=Correspondent Baek Jong-min] The reshuffling of the Dow Jones Industrial Average components, the representative index of the New York Stock Exchange, has led to mixed reactions.
On the 25th (local time), in the first trading session following the announcement of the changes in the Dow components, the stocks of newly included companies Salesforce.com, Amgen, and Honeywell showed strength, while those of excluded companies ExxonMobil, Pfizer, and Raytheon declined.
As of 10:40 AM, Salesforce.com rose 3.6%, Amgen 4.7%, and Honeywell 3.7%. ExxonMobil, which was removed from the index, fell 2.5%, while Pfizer and Raytheon dropped 2.0% and 2.5%, respectively.
This adjustment in the index components was a measure to compensate for the decline in the information technology sector's weighting in the index ahead of Apple's 4-for-1 stock split.
According to CNBC, due to the nature of the index averaging the prices of included stocks, if Apple's stock price falls due to the split, the weighting of information and communication stocks in the Dow would decrease from 27.6% to 20.3%. With Salesforce.com newly included, the information and communication sector's weighting in the Dow can be maintained at 23.1%.
The biggest loser from this index reshuffle is ExxonMobil. The oil major, which has been a mainstay of the Dow since 1928, has been abruptly pushed out amid falling oil prices.
The energy sector's weakness is not limited to the Dow. In the S&P 500 index, which represents the overall New York stock market, the energy sector's weighting is only 2.5%. This is a dramatic change compared to 10 years ago when it was as high as 10%.
The market capitalization of leading information technology stocks such as Apple, Microsoft, Amazon, Alphabet, and Facebook now exceeds that of the entire energy sector.
CNBC reported that ExxonMobil's exclusion from the Dow reflects the changing times.
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