Dow Jones has announced that it would add Apple Inc. to its index, which features blue-chip stock. On March 19, Apple Inc., a leading tech company will replace the telecom company AT&T, which has been listed on the iconic index since 1916.
Apple Inc. To Be Added To Prestigious Dow Jones Stock Index, Boosts Dow’s Tech Weighting
David Blitzer, chairperson and managing director of the S&P Dow Jones Indices Index Committee said, “As a technology leader and the world’s largest corporation, Apple is a clear choice for the Dow Jones industrial average.”
At the start of the trading day on March 6, Apple shares rose 1.3% to $128.06 while AT&T shares fell 1.8% down to $33.38.
However, the Dow Index fell sharply amidst positive employment reports in February as the Federal Reserve prepares to hike rates in June. Wall Street had anticipated the interest hikes to happen in September but that was prior to the positive outlook of the job report that was released February.
The inclusion of Apple onto the Dow index has been a long time coming. There are only 30 stocks on the Dow Jones, which goes as far back as the late 1800s and traces its origin to Charles Dow, a Wall Street Journal editor. On May 26, 1896, the first industrial average was calculated.
“The Dow changes every now and then to fully reflect the changes in the economy. That is why we like this particular change because no company is a better representation of the spirit of innovation and the dynamism of the U.S. economy,” said Alan Skrainka, Corner Stone Wealth Management chief investment officer.
Apple’s replacement of AT&T follows in the footsteps of other such moves since September 2013 when Visa, Goldman Sachs and Nike were added onto the index while Alcoa, Hewlett-Packard and Bank of America were removed.
Quincy Krosby, a Prudential Financial market strategist said, “Including Apple brings an additional dimension to the already popular Dow index. The Dow tries to be continuously relevant and the addition of Apple is a reflection of this.”
Compared to other stock indexes, the 199-year-old Dow has an unmatched reputation.
Krosby added, “The Dow is the headline index that leads mainstream news and Apple is a stock that is found in so many portfolios. As such, Apple has become the Wall Street and Main Street stock.”
Dan Chung, chief executive officer at Alger says that the merging of Apple, the world’s largest company and Dow Jones, possibly the world’s most prestigious stock gauge is significant at two fronts.
Chung observes that professional investors typically pay less attention to the Dow because it only features stocks from 30 companies and focus more on larger stock indices such as the Standard & Poor 500. However, there is an advantage to including Apple onto the blue-chip index.
Speaking to US TODAY, Chung said, “My view is that the Dow Jones is not tech-oriented in any way. By adding Apple, the significance is that it boosts its technology weighting.” But Apple is not the only tech stock on the index, Cisco Systems, IBM and Intel Microsoft are also listed.
Chung added, “Adding Apple also puts in a major consumer brand to the Dow. Apple is the best consumer marketer of our generation and they are selling more than hardware or software.”
Going by current stock prices, Apple ranks as the fifth most expensive stock in the Dow.
Market analysts see the inclusion of Apple into the Dow as a move that would make the stock gauge more volatile. Apple stock prices are notably high and the large number of investors with Apple stocks in their portfolio continues to grow. As such, just as weaker Apple stock prices are having an adverse effect on the Nasdaq so will a fluctuating of Apple prices impact on the Dow.
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