Dow Jones Reshuffles Lineup Of Industrial Average Four Newcomers Replace Four Old-Timers In Widely Followed Stock Market Index
The landlord of Wall Street’s best-known symbol is evicting four long-time tenants.
In an historic shake-up to diversify the 30-company Dow Jones industrial average, Westinghouse Electric Corp., Texaco Inc., Bethlehem Steel Corp. and Woolworth Corp. are out.
Dow Jones & Co. said Wednesday they will be replaced Monday with Travelers Group Inc., Hewlett-Packard Co., Johnson & Johnson and Wal-Mart Stores Inc.
To make sure that the new list’s performance will be comparable to previous years, Dow Jones said it will slightly adjust the formula used to calculate the average.
The last changes to the Dow industrials were made in May 1991, when Caterpillar Inc., Walt Disney Co. and J.P. Morgan were substituted for Navistar International Corp., USX Corp. and Primerica Corp.
The latest shuffle leaves the measure - born 100 years ago when economic power was measured by heavy industry’s might - without a steelmaker and with a greater focus on technology, health care and financial services.
“We’ve always thought of ‘industrials’ as meaning more than manufacturing,” said Paul E. Steiger, managing editor of The Wall Street Journal, which chooses the companies and is published by Dow Jones.
“Nowadays, technological innovation and services of all types are major propellants of the U.S. economy,” Steiger said in a statement.
The companies being removed either lag others in their industry or have shifted from the focus that put them among the ranks of America’s most prominent companies.
Westinghouse, which built an industrial powerhouse with electrical generating plants and kitchen appliances, bought the CBS network last year. It is being removed because of plans announced in November to split into two companies, one handling its refrigerated truck and nuclear power operations and the other its media holdings.
Broadcasting already is represented in the Dow by General Electric Co., which owns NBC, and Disney, which owns ABC.
Its replacement, Travelers, has powerful insurance and brokerage holdings, including Smith Barney. It will join J.P. Morgan as the only other brokerage in the industrial average and would be the only insurer.
Travelers is, in effect, returning to the Dow. After Primerica was removed six years ago, it bought Travelers and took its name.
Texaco is being removed from a roster that already includes bigger oil companies Exxon Corp. and Chevron Corp. Bethlehem Steel is the nation’s second-largest steelmaker, but has been losing money and jettisoning unprofitable businesses.
Hewlett-Packard, the nation’s No. 2 computer company, joins International Business Machines Corp. in the technology ranks of the Dow. Johnson & Johnson, the maker of Tylenol and Band-Aids, joins Merck & Co. as the health care components.
Wal-Mart is the world’s largest retailer and No. 4 in the Fortune 500, eclipsing $100 billion in annual sales last year for the first time. Woolworth has been struggling, selling or closing more than 700 stores, including four chains.
Woolworth’s elimination from the Dow, ironically, came as it announced a $100 million fourth-quarter profit and said it would open about 400 new stores.
The Dow has been soaring to unprecedented heights, rising 75 percent over the past two years to eclipse the 7,000-point barrier. Its rapid growth has prompted worries - and cautionary statements from Federal Reserve Chairman Alan Greenspan - about whether the market is expanding too fast and investors are headed for a fall.
The changes come amid criticism that the Dow has been deficient in representing today’s dominant technology and consumer-services sectors. There are also complaints that the Dow, with only 30 companies, cannot possibly be as representative of the economy as a broader index such as the Standard & Poor’s list of 500 large companies.
xxxx Who’s in, who’s out Here are the additions and deletions to the Dow Jones average of 30 industrial stocks, effective Monday: Added Travelers Group Hewlett-Packard Johnson & Johnson Wal-Mart Stores Removed Westinghouse Electric Texaco Bethlehem Steel Woolworth