Amazon.com is set to join the Dow Jones Industrial Average, becoming part of the prestigious 30-stock average alongside Apple, Walt Disney, Walmart, and other prominent companies
S&P Dow Jones Indices announced on Tuesday that the e-commerce giant will replace drugstore operator Walgreens Boots Alliance in the Dow before the market opens on Monday.
The decision to add Amazon.com to the Dow Jones Industrial Average was prompted by Walmart’s announcement of a 3-to-1 stock split, which will reduce Walmart’s stock weighting in the index. As the Dow is a price-weighted index, stocks with higher prices hold more weight.
Seattle-based Amazon will officially join the Dow on the same day as Walmart executes its stock split.
S&P Dow Jones Indices stated, “Reflecting the evolving nature of the American economy, this change will increase consumer retail exposure as well as other business areas in the DJIA.”
The inclusion of Amazon in the Dow, along with Walgreens’ exit and Walmart’s stock split, will have a ripple effect on the weighting of Dow stocks. Following the shift, Amazon’s weight in the Dow will rank 17th out of the 30 stocks, while Walmart’s weighting will drop from 17 to 26. UnitedHealth Group will maintain its position as the most heavily weighted stock in the index.
The Magnificent Seven: Redefining Market Dynamics in the Modern Era
S&P Dow Jones’ emphasis on the retail aspect of Amazon in its statement underscores the significance of the company’s entry into the Dow. However, beyond retail, Amazon’s inclusion also highlights the growing influence of the “Magnificent Seven” tech companies.
These firms, including Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia, are increasingly driving market gains and shaping the trajectory of the broader economy.
Fueled by the surge in artificial intelligence technology, the Magnificent Seven tech companies played a pivotal role in propelling the S&P to record highs in 2023, despite challenges such as inflation, recession fears, and a banking crisis.
The Dow index’s underperformance relative to the S&P and Nasdaq in 2023 has been attributed by analysts to its limited exposure to tech stocks, particularly the Magnificent Seven.
Currently, the Dow includes only two of these tech giants: Apple and Microsoft, which joined the index in 2015 and 1999, respectively. With Amazon’s inclusion, it will become the third.
By the end of 2023, the Magnificent Seven accounted for nearly 30% of the S&P 500’s market value, sparking speculation about a potential bubble as investor interest surged.
Contrary to bubble theories, Nigel Green, CEO and founder of the deVere Group, perceives a “fundamental shift” in the economy. He views the market’s response to the Magnificent Seven as grounded in the transformative power of AI, reshaping entire industries, boosting productivity, and laying the groundwork for new ones. According to Green, these companies are not merely capitalizing on current technologies but actively shaping the future of AI.
Uber replaces JetBlue
Also before the start of trading on Monday, ride-sharing service Uber Technologies will be added to the Dow Jones Transportation Average, S&P Dow Jones Indices said. The change help give the index exposure to the ride-sharing industry.
San Francisco-based Uber will take the spot now held by JetBlue Airways, whose low share price caused its weight in the index to drop to less than one-half of one percentage point.
S&P Dow Jones Indices made the announcements after the closing bell. Amazon shares rose 1.4% in after-hours trading, while Uber’s stock picked up 1.1%.