Apple Inc. (NASD:AAPL) will replace AT&T Inc. (NYSE:T) in the Dow Jones Industrial Average (DJIA) after the close of trading on Wednesday, March 18.
The change will be effective with the opening of trading on Thursday, March 19. The index change was prompted by Visa Inc.’s (NYSE:V) 4:1 stock split which is scheduled to be effective at the same time. The post-split adjusted lower price of Visa will reduce the weighting of the Information Technology sector in the index. Adding Apple to the index will help to partially offset this reduction. In price weighted indices such as the DJIA, a large change in price of a high priced stock can have a material impact on sector representation in the index and this index change is designed to minimize that impact. The Telecommunication Services sector will continue to be represented in the DJIA by Verizon Communications Inc. (NYSE:VZ).
“As the largest corporation in the world and a leader in technology, Apple is the clear choice for the Dow Jones Industrial Average, the most recognized stock market measure,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “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. Among the current DJIA constituents, AT&T has one of the lowest prices. Moreover, the DJIA is over-weighted in telecommunications and AT&T and Verizon are quite similar, though AT&T has a smaller market capitalization.”
Apple, headquartered in Cupertino, CA, designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players.
The change won’t cause any disruption in the level of the index. The divisor used to calculate the index from the components’ prices on their respective home exchanges will be changed prior to the opening on March 19. This procedure prevents any distortion in the index’s reflection of the portion of the U.S. stock market it is designed to measure.
For more information, please visit http://www.djaverages.com. The Dow Jones Industrial Average and Dow Jones Composite Average also are members of the Dow Jones Averages family.
Source: McGraw Hill Financial
MacDailyNews Take: Boom!
The Dow has to change from time to time in order to truly reflect the changing nature of our economy. That’s why we like the change. No company is a better reflection of the innovative spirit and dynamic nature of the U.S. economy. – Alan Skrainka, chief investment officer at Cornerstone Wealth Management
Dow – WOW!
Apple is truly well enDOWed…
Lol, watch everybody start hating the Dow now…
Too late.. In an earlier MDN article lots of Apple fans trashed the DJIA for NOT having AAPL in its ranks.. 😛
It is The Way of the Dow. 😉
But it’s just a fruit company !
This is huge news. Also, it’s just. AT & T sucks. In fact, AT & T is the poster child for incompetence AND indifference.
Made my day!
Even a few years of exclusive rights to distribute the iPhone in the U.S. was not enough of an advantage for AT&T .
The dent in the universe continues to expand.
wasn’t Dell a DJIA component at one point? 🙂
haha awesome pic
Wow. A little over thirty years ago Steve flew the Jolly Roger over the building where they developed the Macintosh. Now AAPL is joining the DJIA. Wow.
DOW has turned to AAPL for confidence to go on a big 20K run!
This will have a short-term boost on the stock, as those funds that mirror the Dow will be buyers leading up to that date. Oh and that Watch thing too 🙂
Actually, the index funds won’t begin buying until the actual change, but most other speculators will be buying in the coming days, in order to cash in on the funds’ buying. There will be a peak, and then it might settle a bit below that peak, when the speculators buying between now and then, sell after the date, when they are happy with the short bump.
Great pic of Steve…
Maybe Apple ISN’T Doomed after all..
Don’t tell the analysts! It’s bad luck! 😀
Maybe it’s just an indicator that AAPL is believed to have stabilized and will only move marginally up or down.. Indexes don’t generally pick volatile stocks..
the Dow of Apple…
Dow Jones has a long history of pumping up their average with winners. Imagine where the average would be today if they hadn’t waited so long include Apple, or hadn’t added Microsoft in 1999.
HAHAHAHA! No doubt it was our making fun of ye olde Dow Jones here at MDN two days ago that convinced New Corp to catch up with modern times and add Apple! 😉
The index change was prompted by Visa Inc.’s (NYSE:V) 4:1 stock split which is scheduled…
No, No! It was us here at MDN, no doubt about it. 🎉 🎊 🎩
Is this to really benefit Apple or the thieving lying investors and corporations feeding vampires from the DJIA? 😈
Will this bring an onslaught of the “Dow is Doomed”?
At any rate, way to go Apple.
It doesn’t always appear to be an advantage moving to the Dow. Microsoft (ok, ok…), Cisco and Intel all dropped by a significant margin when they moved in. Let’s hope AAPL set a new trend 🙂
Can we get Olivia Munn in here to explain how this works?