Apple Inc, the largest US company by market value, is set to join the Dow Jones industrial average, replacing AT&T Inc, in a change that reflects Apple’s dominant position in the US consumer economy.
The decision to nudge aside AT&T, which has been part of the Dow for the better part of a century, is a recognition of how communications and technology have evolved. It is also a marker of Apple’s transformation — from a struggling company with a small, fervent following two decades ago — into the US’ predominant consumer tech company.
“This is a sign of the times, and it might get everyone to look at the Dow more than they have been,” said Philadelphia Trust Co chief investment officer Richard Sichel, who oversees investments worth US$2 billion. “It would be difficult to pick any 30 companies that would cover the entire economy, especially compared with the S&P 500, but it does give the Dow more credibility.”
The action, by S&P Dow Jones Indices, had been widely expected since Apple split its shares seven-for-one in June last year.
AT&T declined to comment on its removal from the average, of which it has been a member for most of the past 100 years. The stock was added to the Dow in 1916, the year after the first-ever transcontinental telephone call. It was removed in 2004, but after SBC Communications renamed itself AT&T following a 2005 merger, it was reinstated.
“It was a new way of life; telephones, back then 100 years ago, these talking machines,” S&P Dow Jones Indices analyst Howard Silverblatt said. “Back then, AT&T was it, end of story.”
The Dow Jones industrials is the oldest US stock average, first published in 1896. Its compact size — just 30 companies — and its mission to reflect the US economy means that many retail investors are more familiar with it than other indices covering a broader cross-section of the market.
Even though professional managers generally benchmark against the S&P 500, additions and removals from the Dow are still a big event on Wall Street. It was last altered in September 2013 when Goldman Sachs Group Inc, Visa Inc and Nike Inc were added.
Apple did not respond to requests for comment. The company has a market capitalization of US$737 billion, making it twice the size of the second-largest Dow component, Exxon Mobil Corp.
Despite Apple’s size, at Thursday’s close of trading it would only have a 4.66 percent weighting in the Dow because of its price, the index company said. Apple is set to join the average after the close of trading on March 18.
Apple shares rose 0.15 percent to US$126.60 on Friday, while those of AT&T fell 1.5 percent to US$33.48.
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