Dow Undergoes Rare Revision

It doesn’t happen often – but today it was announced that the Dow Jones Industrial Average will undergo some changes.
Bank of America Corp. and Chevron Corp. will replace Altria Group, Inc., and Honeywell International, Inc., in the Dow Jones Industrial Average, or “the Dow’ as it is more commonly referred to, effective with the opening of trading on February 19, Dow Jones & Company announced.
“The catalyst for these changes is the restructuring in progress at Altria, which will result in a much smaller and more narrowly focused company,” said Marcus W. Brauchli, managing editor of The Wall Street Journal. The Journal’s top news editor oversees the makeup of “The Dow,” which Charles H. Dow created as a 12-stock index in May 1896, according to a press release.
Dow Jones notes that the changes – the first in the 111-year-old stock index since April 8, 2004, when three stocks out of 30 were replaced – won’t cause any disruption in the level of the index. The divisor used to calculate The Dow from its components’ prices on their respective home exchanges will be changed prior to the opening on February 19. This procedure prevents any distortion in The Dow’s reflection of the U.S. stock market, according to the announcement.
Reasons for the Changes
“As usual when we make any change we review all the stocks,” Brauchli said, explaining the moves. “In doing so, we saw that the financials industry was under-represented – notwithstanding the current turbulence – and that the oil and gas industry’s growing importance to the world economy called for another representative to join ExxonMobil Corp,” he said.
Altria, formerly Philip Morris Cos., has been in the industrial average since Oct. 30, 1985 (it adopted its current name in 2003). Last year it spun off Kraft Foods, Inc. It has announced the spin-off next month of Philip Morris International, Inc., which will leave it as a purely domestic tobacco company, according to Dow Jones.
Honeywell is being dropped because it is the smallest of the industrials in terms of revenue and earnings. Additionally, the role of industrial companies relative to the overall stock market has been shrinking in recent years, Brauchli said. AlliedSignal acquired Honeywell in late 1999 and adopted that name for the new entity. The predecessor of AlliedSignal was Allied Chemical & Dye Corp., formed in 1920 and added to The Dow on December 7, 1925.
Interestingly enough, Chevron has been in the industrial average twice before. The first time, as Standard Oil Co. of California, was from February 1924 to August 1925. The company re-joined The Dow in 1930, but was replaced on November 1, 1999. The Chevron name was adopted in 1984.

For more information, see the web site of Dow Jones Indexes at