A major shake-up is taking place at the Dow Jones Industrial Average.
S&P Dow Jones Indices said that three new companies will be joining the 30-stock benchmark and replace long standing stocks that had been listed on the exchange for generations. Cloud computing company Salesforce.com (NYSE:CRM) will replace Exxon Mobi (NYSE:XOM)l, Amgen (NASDAQ:AMGN) will replace Pfizer (NYSE:PFE) and Honeywell International (NYSE:HON) will replace Raytheon Technologies (NYSE:RTX) on the Dow Jones Industrial Average.
The changes will go into effect before the market opens on August 31. The shake-up was prompted by Apple’s (NASDAQ:AAPL) decision to enact a four-for-one stock split, which would significantly reduce the benchmark’s exposure to the information technology sector.
Apple’s stock split reduces the technology weighting within the Dow to 20.3% from 27.6%. Adding Salesforce to the Index brings its technology weighting back to 23.1%. As a result of Apple’s 4-for-1 stock split, its ranking is set to drop from the most heavily weighted component to the 17th most influential.
The 124-year-old Dow Jones average is price-weighted, meaning stocks with higher share prices are given greater weighting. The S&P 500, on the other hand, is based on market capitalization.
Based on Monday’s closing prices, UnitedHealth Group (NYSE:UNH) will become the most heavily weighted component in the Dow Jones, followed by Home Depot (NYSE:HD) and Amgen. Salesforce will be the sixth most weighted stock, and Honeywell the 11th, according to S&P Dow Jones Indices.
The last time three simultaneous changes occurred in the Dow Jones Industrial Average was in 2013 when Goldman Sachs (NYSE:GS), Nike (NYSE:NKE) and Visa (NYSE:V) replaced Alcoa (NYSE:AA), Bank of America (NYSE:BAC) and Hewlett-Packard (NYSE:HPE). Exxon has been a Dow component for nearly 100 years. It was first added as Standard Oil of New Jersey in 1928 when the benchmark expanded from 20 stocks to 30. Pfizer was added in late 2004.
The Dow Jones Industrial Average has gained 55% from its March 23 low, and is sitting 4% below its all-time high of 29,568.57 reached on February 12 of this year.
