Dow Industrials: New Kids on the Stock

The adjustment happened last Friday, although it was made effective at the open of trading on Monday. “The index changes were prompted by the low stock price of the three companies slated for removal and the index committee’s desire to diversify the sector and industry group representation of the index,” S&P Dow Jones Indices said on Tuesday.

While their performance has been mixed this year –H-P is up more than 50%, while Alcoa is down almost 7%– all three departing stocks have underperformed the broader stock market in recent years, according to the WSJ.

The changes are the biggest in the index since April 8, 2004. However, they won’t cause any disruption in the level of Dow Industrials, because the divisor used to calculate the Dow from its components’ prices on their respective home exchanges will be changed.

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