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Amazon’s Inclusion in the Dow Jones Industrial Average Signals Shift in Consumer Retail Landscape

ByDayne Lee

Feb 22, 2024

In a significant move, Amazon is poised to join the esteemed Dow Jones Industrial Average, marking a pivotal moment in the evolution of the index. The decision, announced by S&P Dow Jones Indices on Tuesday, will see Amazon replacing Walgreens Boots Alliance effective next week. This development elicited varied reactions from investors, with Amazon’s shares rising by 1.3% in extended trading, while Walgreens witnessed a 3% decline.

Rationale Behind the Change

The addition of Amazon to the Dow is expected to enhance consumer retail exposure within the index, reflecting the shifting dynamics of the retail landscape. S&P Dow Jones Indices highlighted that the decision was propelled by Walmart’s recent announcement to split its stock. This strategic move underscores the index’s commitment to reflecting the evolving composition of the US stock market.

Significance of the Dow Jones Industrial Average

The Dow Jones Industrial Average, inaugurated in 1896, holds significant sway among retail investors, serving as a barometer of the broader stock market sentiment. While retail investors closely track the movements of the Dow, institutional investors often benchmark their performance against the broader S&P 500 index.

Amazon’s Multifaceted Influence

Beyond its dominance in online retail, Amazon has established itself as a major player in various sectors, including cloud computing, entertainment, and beyond. Quincy Krosby, Chief Global Strategist of LPL Financial, emphasized Amazon’s unique position as a hybrid entity, spanning diverse categories and embodying the essence of commerce across the United States.

According to Krosby, “Amazon is almost a hybrid name. It’s one of the names that falls into different categories. It in many ways exemplifies what the Dow stands for in terms of representing commerce across the US.”

Implications of the Change

The inclusion of Amazon in the Dow, effective at the opening of trading on Monday, underscores the index’s adaptability to the evolving market landscape. Despite Walmart’s continued presence in the Dow, its forthcoming three-for-one stock split, scheduled after market close on Friday, will lead to a reduction in the retailer’s weight within the index.

It’s worth noting that the Dow’s weighting is based on the share prices of its components rather than their overall market value. Moreover, Uber Technologies is set to join the Dow Jones Transportation Average, replacing JetBlue Airways Corp, thereby introducing exposure to the burgeoning ride-hailing industry within the index.

Historical Context and Recent Changes

Amazon’s inclusion in the Dow represents the first alteration since 2020 when Salesforce, Amgen, and Honeywell International replaced Exxon Mobil, Pfizer, and Raytheon Technologies, respectively. Walgreens had joined the Dow in 2018, replacing General Electric.

Featured image credit: Nathan Stirk via Getty Images

Dayne Lee

With a foundation in financial day trading, I transitioned to my current role as an editor, where I prioritize accuracy and reader engagement in our content. I excel in collaborating with writers to ensure top-quality news coverage. This shift from finance to journalism has been both challenging and rewarding, driving my commitment to editorial excellence.