The Dow Jones industrial average is dropping Bank of America, Hewlett-Packard and Alcoa, its three-lowest priced stocks, as part of a six-company shakeup of the most widely known barometer of the U.S. stock market.
S&P Dow Jones Indices said Tuesday it will add Visa Inc., sneaker maker Nike Inc. and the investment bank Goldman Sachs Group Inc. in the first three-for-three company change to the index since April 8, 2004. The changes will take effect at the start of trading Sept. 23.
S&P Dow Jones Indices manages the average and said the changes won’t disrupt the level of the 30-company index. It said a push to diversify the sector and industry group representation of the index helped prompt the changes.
A small committee decides which companies are added or dropped. David Blitzer, chairman of the index committee, said the changes will bring down the weight of the other 27 stocks in the index and make it a better measure of what’s happening in the broader market.
The Dow is a price-weighted index, which means its value is based on the price of a company’s stock rather than its market value.
Last September, the index replaced Kraft Foods with health insurer UnitedHealth Group Inc.
General Electric Co. is the only original member in the Dow. The industrial giant was briefly delisted but has stayed in the index since its reinstatement in 1907.
Charles H. Dow created the index with the intention of giving the stock market credibility and making investing more understandable. The original Dow Jones industrial average had 12 members and was published May 26, 1896. It featured companies such as American Cotton Oil, Chicago Gas and U.S. Rubber.