Chevron, Bank of America Added to Dow

123jump.com Staff
11 Feb, 2008
New York City

U.S. stocks traded in a tight range after the European banks declared more losses related to subprime and leveraged loans. Dow Jones replaced Altria and Honeywell from the index with Chevron and Bank of America. The index has been rebalanced for the first time after three years since its last change when three out of thirty components were replaced.

[R]1:30PM New York – Dow Jones replaces index members. European markets close lower and Asian markets fell sharply.[/R]

Dow Jones Indexes the publisher of Dow Jones Industrial Average decided to replace Honeywell International and Altria with Bank of America and Chevron. The overhaul in the index after three years reflects the current changes in market place.

The 111 year old index was last revised on April 19, 2004 according to a press release from Dow Jones and the current selection will be effective with the opening on trading on February 19.

“We saw that the financials industry was under-represented – notwithstanding the current turbulence – and that the oil and gas industry’s growing importance to the world economy called for another representative to join ExxonMobil Corp,"" said Marcus W. Brauchli, managing editor of the Wall Street Journal.

While Dow Jones industrial Average is one of the most often quoted indexes in the financial press, much of the investments linked to the stock market has moved to a broader index S&P 500 and other broader indexes such as Russell universe of indexes. DJIA is a price sensitive index but S&P 500 index is a market cap weighted index.

Altria, formerly Philip Morris Cos., has been in the industrial average since Oct. 30, 1985. It adopted its current name in 2003. Last year it spun off Kraft Foods, Inc. It has announced the spin-off next month of Philip Morris International, Inc., which will leave it as a purely domestic tobacco company.

Honeywell is being dropped because it is the smallest of the industrials in terms of revenue and earnings. Additionally, the role of industrial companies relative to the overall stock market has been shrinking in recent years, Brauchli said. AlliedSignal acquired Honeywell in late 1999 and adopted that name for the new entity.

Chevron has been in the industrial average twice before. The first time, as Standard Oil Co. of California, was from February 1924 to August 1925. The company re-joined The Dow in 1930, but was replaced on Nov. 1, 1999. The Chevron name was adopted in 1984.

European indexes traded in a tight range but rise in oil lifted energy stocks in the region. Venezuelan President, who is frequently at odds with the U.S. international policies, issued a blistering threat to halt the flow of oil to the U.S. The crude oil price edged higher but energy markets appear to take comments in stride.

Stocks in Asia fell after a gloomier statement from the G7 Finance Ministers. The statement indicated a likely decline in the world economic growth and estimated that the losses linked to U.S. subprime could rise to $400 billion.

International Markets Indexes

In Hong Kong Hang Seng index decreased 853.35 or 3.64% closed to 22,616.11. Australia ASX 200 index decreased 120.40 or 2.13% to close 5,537.60. Markets in Japan and Vietnam were closed today.

In South Korea Kospi Index decreased 55.90 or 3.29% to close at 1,640.67, in Thailand SET index closed lower 2.29 or 0.28% to 804.15 and Indonesia JSE Index edged decreased 49.71 or 1.88% to 2,589.38. Sensex index in India decreased 834.00 or 4.78% to 16,630.91.

In London FTSE 100 Index closed lower 76.30 or 1.32% to 5,707.70, in Paris CAC 40 Index decreased 26.95 or 0.57% to close at 4,682.70 and in Frankfurt DAX index lower 23.74 or 0.35% to close at 6,743.54. In Zurich trading SMI decreased 99.45 or 1.34% to close at 7,347.50.