Midland, Michigan-based Dow has been included in the blue-chip index since 2019, when it was separated from its former parent company, DowDuPont.
The Dow Jones Industrial Average started out as an index of 12 industrial stocks, including General Electric Co., but it is a much narrower stock index than the S&P 500 or Nasdaq 100, lacking the technology stocks that have dominated the market. has faced criticism for being In recent years.
The switch is the second this year, after Amazon.com replaced Walgreens Boots Alliance in February. Prior to that, the Dow had been stable since August 2020, when Amgen, Honeywell International and Salesforce.com replaced Exxon Mobil, Pfizer and Raytheon.
Over more than a century, the benchmark has evolved to 30 stocks, including stocks in the technology, financials, healthcare, and consumer sectors. The committee selects 30 components and, like the S&P 500, weights them by price rather than market capitalization.
Dow’s price-weighting methodology has sometimes been a stumbling block for technology companies that avoid splits and whose stock prices often trade above $1,000. Until recently, that included Nvidia. The company has split its stock twice in the past four years, the most recent of which was a 10-for-1 stock split that took effect in June. Nvidia stock closed at $135.40 on Friday.
Although the Dow’s influence as a passive manager tracking market-value benchmarks has waned over the years, the Dow remains an exclusive club and remains one of the most visible indicators of U.S. industrial influence. It functions as one.
