The Dow Jones Industrial Average is hanging up on AT&T and bringing Apple on board in its place. The change will happen on March 18 and will more accurately reflect the overall market, according to Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices David Blitzer.
Dow Jones Industrial Average drops AT&T for Apple
Dropping AT&T and adding Apple will bring a better balance to the DJIA because the company mix was weighted too heavily towards telecommunications. Verizon will stay in the mix to represent that part of the market. Apple's position as a world leader in the technology market, plus its recent stock split, made the company an easy choice for the average.
Mr. Blitzer said,
The DJIA is price weighted so extremely high stock prices tend to distort the index while very low stock prices have little impact. The timing of Apple's addition to the DJIA hinged on two stock splits: Apple's 7:1 last June and Visa's 4:1 on March 19th this year. Apple's split brought the stock price down closer to the median price in the DJIA. The Visa split will reduce the technology weight in the DJIA and make room for Apple.
He added that AT&T has been one of the lower priced constituents on the DJIA, and that the index's level won't change once Apple is added into the mix.
The DJIA is a collection of 30 Nasdaq and New York Stock Exchange stocks averaged together and used as a sort of overview of U.S. market performance. Since the index generally reflects greater stock market performance it's a gauge giving investors and brokers a snapshot look into overall trading.
Apple has been seen as a good candidate for the DJIA for some time, but ahead of its stock split was priced far too high to be part of the average. Following its 7-to-1 stock split, and now Visa's split, Apple fits in nicely in the average.
Apple is currently treading at US$128.4, up 2.04 (1.61%).