DOW Components Change

CNBC/Bloomberg ^ | April1,2004 | CNBC/Bloomberg

[BenLurkin]

Just announced on CNBC and Bloomberg Financial television:

AT&T and International Paper have been dropped form the Dow Average.

Verizon and AIG to be added.

Effective April 8th.

[CasearianDaoist]

Who would have ever thought that we would see AT&T removed from the DOW? Seems sad to me.

[Alberta's Child]

I'm a little confused -- isn't AIG a financial services firm? How do they fit into an "industrial" indicator?

[BenLurkin]

Also:

Eastman Kodak is coming OFF.

Pfizer is coming ON.

Also effective April 8th.

[GraniteStateConservative]

We don't have industries anymore. It's de-industrialization here in America. Get with the program.

[The G Man]

Yeah, AIG is an insurance company.

[.cnI redruM]

There was a time when GM and US Steel were the dominant Dow Components. I'd enjoy seeing the algorithm they use to determine whose worthy.

[leadpenny]

Is the Ajax Buggy and Buggy Whip Corporation still there?

[Alberta's Child]

Then I guess we'll call it the "Dow Jones Bullsh!t Average" from this point forward.

[Fury]

We don't have industries anymore. It's de-industrialization here in America. Get with the program.

In the case of Kodak coming off, their problems started years ago. They reacted too little, too late to Fuji, diversified in questionable directions (e.g. Sterling Drug) that hurt them for years. Look to EK Management and yes, some of the workers, for their problems.

[KJacob]

This move should drive the market farther up. Since the new companies are looking better than the ones being replaced.

[Alberta's Child]

There was also a time when the Dow Jones industrial index was comprised entirely of railroad stocks.

I may be wrong about this, but I believe General Electric is the only company that has been a component of the DOW since the beginning.

[knarf]

I'm a lot confused.

What factors determine 'being dropped'?
Who determines that?
What does it all mean in the greater scheme of things?

Hiding from the public?

Shenenigans in the exchange?

Obviously I know 3% less than nothing about the market etc. ... but I read this stuff hoping someday to unseat The Donald.

<8^)

[leadpenny]

Correct on GE

[Mr. Jeeves]

Because the Dow "Industrials" long ago became an index of the top 30 stocks, not just industrial stocks. It already contains Citigroup and Microsoft.

And besides, our top 30 industrial firms are now in Guangdong, China...(rim shot)

[BenLurkin]

"Industrial" is a pretty broad term for the purpose of the DOW average.

The current DOW components are:

AA ALCOA INC
AXP AMER EXPRESS
BA BOEING CO
C CITIGROUP
CAT CATERPILLAR INC
DD DU PONT CO
DIS WALT DISNEY CO
EK EASTMAN KODAK
GE GENERAL ELEC CO
GM GENERAL MOTORS
HD HOME DEPOT INC
HON HONEYWELL INTL
HPQ HEWLETT-PACKARD
IBM INTL BUS MACHINE
INTC INTEL CORP
IP INTL PAPER CO
JNJ JOHNSON&JOHNSON
JPM JP MORGAN CHASE
KO COCA COLA CO
MCD MCDONALDS CORP
MMM 3M COMPANY
MO ALTRIA GROUP
MRK MERCK & CO
MSFT MICROSOFT CP
PG PROCTER & GAMBLE
SBC SBC COMMS
T AT&T CORP 19.57
UTX UNITED TECH CP
WMT WAL-MART STORES
XOM EXXON MOBIL

Citi Bank and JPM organ are financial companies, Walmart is a retailer, McDonalds is a fast food chain, etc.

[Alberta's Child]

I think it's the size of the company that is the key factor. I'm guessing that AT&T has been eclipsed by Verizon in terms of annual revenues, and International Paper is now smaller than AIG. I still have no idea why AIG would be considered an "industrial" company, though -- maybe they have a number of industrial subsidiaries or own a substantial base of industrial properties as part of their asset base.

[GraniteStateConservative]

Truth in advertising.

[Alberta's Child]

I can understand why Wal-Mart and McDonald's are on the list. Because the DOW is supposed to be an indicator of industrial activity, these stocks serve as reasonable indicators of industrial activity even if they themselves aren't the ones who are doing the manufacturing. This is the same rationale for why railroads were major components of the DOW back in the 19th century.

The financial services companies are the ones I don't get -- isn't there a separate DOW index for financial services?

[BluH2o]

Pfizer is coming ON.

Excellent ... I've had 1000 shares of Pfizer and Verizon (1200) for several years now. Higher visibility where these stocks are concerned should be beneficial.