Amazon enters the Dow Jones index Financial markets

Next Monday, e-commerce and cloud computing giant Amazon will become a member of the world's most famous stock index: the Dow Jones Industrial Average. It officially joins the stock market elite to which it already belongs due to its stock market value and revaluation. For its part, Uber will replace airline JetBlue in the Dow Jones Transportation Index, the oldest index in the United States.

The industry is not what it was for a long time, and among the index's 30 components, technology companies (Apple, Microsoft, Cisco, IBM, Intel, Salesforce, and Amazon itself), financial and trading companies dominate, although industry giants such as Boeing , 3M, Honeywell, Dow and Caterpillar.

The Dow Jones Industrial Average combined companies from different sectors to try to make its composition better reflect the US economy. Amazon will replace the pharmacy and department store chain Walgreens in the index. “Reflecting the evolving nature of the US economy, this change will increase exposure to consumer retail, as well as other business areas.” Standard & Poor's Dow Jones, which manages the index, explained in a statement.

The change is due to the decision of Walmart, one of its components, to split each of its shares into three, which will reduce the weight of the distribution giant in the index. As a stock market index, the Dow Jones has some characteristics, because it is an average of prices and not a market capitalization-weighted index. This means, for example, that Home Depot has a greater weight in the index than Apple, because the value of its shares is greater individually. When running DividesWalmart's weight will suddenly be reduced by a third, even though the company will remain the same.

Because of this calculation method, professional managers tend to prefer indices like the Nasdaq 100 or S&P 500, which are broader-based and capital-weighted. In these indices, the star values ​​(the seven greats: Apple, Microsoft, Alphabet, Nvidia, Amazon, Meta, Tesla) gain increasing weight and their development determines the development of the index as a whole. The Dow Jones is late in the revaluation because stronger values ​​have less weight.

The Dow Jones, on the other hand, is an index steeped in history and the most popular reference. First calculated as such on May 26, 1896, it is the second oldest stock market index in the United States, after its sibling, the Dow Jones Transportation Index, which included securities mainly from the railroad sector. It was created by Charles Dow, co-founder of The Wall Street Journal Dow Jones & Company, bearing his name and the name of his statistical partner, Edward Jones.

Of the original 12 members of the index, none remain. The company that lasted the longest was General Electric, It was phased out in 2018, replaced by Walgreens, Which did not last long in the selected group. Currently, the oldest stock in the index is Procter & Gamble, which entered in May 1932.

Amazon, which was founded in 1994 as a digital bookstore, now combines technology, distribution, computing, advertising and other businesses. After a very strong Christmas quarter, Amazon closed 2023 with sales of $574.785 million. 12% increase over the previous year. So, it's a giant corporation that moves more than half a billion dollars a year, and reflects, like few companies, the makeup of the American economy. The entry into the index is another milestone in the rapid expansion of the Seattle-based retailer, which is the second-largest private sector employer in the United States, after Walmart.

Amazon's market value is $1.7 trillion, but its weight in the index will be half that of Caterpillar, which has a market value of $156 billion, as the e-commerce giant's shares move about $167 and the industrial company's shares move about $167. 313.

Meanwhile, the index manager decided to enter Uber Technologies into Dow Jones Transportation, where it will replace the airline JetBlue. “This change will help the index gain exposure to the ride-sharing industry. This change is due to JetBlue's weight in the index being lower, by less than half a percentage point, due to a decline in its stock price.” Refers to the Standard & Poor's Dow Jones Index.

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