Wednesday, September 11, 2013
The Dow Jones Industrial Average is getting a makeover: Alcoa, Bank of America and Hewlett-Packard are being dropped from the index of America's 30 top companies and replaced by Goldman Sachs, Nike and Visa.
The barometer of America's stock market, The Dow Jones Industrial Average is getting a makeover: Alcoa, Bank of America, and Hewlett-Packard are being dropped from the index of America's 30 top companies and replaced by Goldman Sachs, Nike and Visa. To find out why, KPBS Morning Edition anchor spoke with San Diego State University finance expert Dan Seiver.
Q: What prompted the changes?
A: The ones that are going out have had lots of trouble over the past five years and are marginally profitable, if at all. Their stock prices are relatively low, Alcoa Seltzer less than $10 a share and it can't be a blue chip on your sign for $8 share. You can be a blue chip when you are shrinking or when your stock prices are low. The three that are coming in are all extremely profitable and have been growing and sell for much higher prices. This is there chance to update the Dow and reflect that.
Q: The index committee which makes that decision opted to pass on Google and Apple once again, both of them very profitable companies. What accounts for that?
A: That's an interesting question because at least one of them, if not both of them aught to be in there, but I think their feeling is that they already have Microsoft and Intel, and so they are holding off on those companies.
Seiver said the changes on the Dow will take effect Sept. 23.