These changes are the first in the 107-year-old stock index since Nov. 1, 1999, when four stocks out of 30 were replaced.
"None of these changes was triggered by an event such as an imminent merger, which was the case in the past three instances of changes dating back to the early 1990s," said Paul E. Steiger, managing editor of The Wall Street Journal. By tradition, 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 and is now the best-known stock-market barometer in the world.
"Rather, they recognize trends within the U.S. stock market, including the continued growth of the financial and health care sectors and the diminishing relative weight of basic materials stocks," he said.
John Prestbo, editor of Dow Jones Indexes, said that all 30 stocks were reviewed in the course of arriving at the decision to replace three. "There are no pre-determined criteria for a stock to be added or deleted, though we intend that all components be established U.S. companies that are leaders in their industries," he said. For the sake of continuity, composition changes are rare by intention, Mr. Prestbo said.
Both Verizon and SBC Communications Inc., added in 1999, were among the seven companies carved out of AT&T in an antitrust ruling in 1984. Mr. Prestbo said this is the third instance in which descendants have taken the place of broken-apart parent companies to represent their respective industries in The Dow. ExxonMobil Corp. is a combination of two descendants of Standard Oil Co. (New Jersey), broken up in 1911. Boeing Co. and United Technologies Inc. trace their lineage to United Aircraft Corp., which was split in 1934.
AT&T was in the Dow Jones Industrial Average from Oct. 4, 1916, to Oct. 1, 1928; it reentered on March 14, 1939. Kodak has been a component of The Dow since July 18, 1930, and International Paper since July 3, 1956.
The changes 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 markets will be changed prior to the opening on April 8. This procedure prevents any distortion in The Dow's reflection of the U.S. stock market.
For more information, see the web site of Dow Jones Indexes at http://www.djindexes.com. The Dow Jones Transportation Average, Dow Jones Utilities Average and Dow Jones Composite Average also are members of the Dow Jones Averages family.
