Exxon Ejected From Dow After 92 Years in Biggest Shake Up Since 2013

  • Dow 30 shuffle due to Apple stock split and need to diversify, reflect economy
  • Exxon, Pfizer and Raytheon being removed effective August 31
  • Salesforce, Amgen, Honeywell to take their place

Major changes are coming to the widely-watched Dow Jones Industrial Average (DJIA) benchmark index. Before the opening of trading on August 31, Salesforce.com will replace Exxon Mobil, Amgen will replace Pfizer, and Honeywell International will replace Raytheon Technologies on the 30-stock, blue-chip index.

S&P Dow Jones Indices, the company behind the index, said the changes were prompted by constituent Apple’s decision to split its stock 4:1. The iPhone maker’s share price will fall to around $120 at the end of the month, and since the Dow is price-weighted, this will reduce its exposure to the information technology sector.

The biggest shakeup to the index since 2013 will help offset that reduction and also diversify representation by “removing overlap between companies of similar scope and adding new types of businesses that better reflect the American economy,” said the press release. This won’t disrupt the level of the index since the index divisor used to calculate it will be changed prior to the opening on August 31, 2020.

Source: S&P Dow Jones Indices.

“Basically Apple — by itself — took the technology [weighting] within the Dow down from 27.6% to 20.3%. It’s a significant decline,” Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, told CNBC. “By adding Salesforce, you can come back to 23.1% of the Dow being in technology.”

Dow sector weightings as of July 31 2020. Source: S&P Dow Jones Indices.

The Dow was created in 1896 by Charles Dow and originally consisted of a dozen industrial companies. Exxon Mobil first joined it in 1928 when it was known as Standard Oil of New Jersey. The oil and gas company is the oldest current member and is being dropped after almost a century to be replaced by cloud computing leader Salesforce. Chevron will soon be the only energy company on the index left.

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