Apple replaces AT&T on Dow Jones Industrial Average

Apple will replace AT&T in the Dow Jones Industrial Average at the close of trading on March 18th, S&P Dow Jones Indices said yesterday.

The decision was prompted by Visa’s move to split its shares on the same date, which will dilute the weighting of the information technology sector within the index. Visa, which currently holds a 9.7 per cent weight in the Dow, will see its index weighting fall to less than 3 per cent following its four-for-one share split.

The Dow Jones Industrial Average is a share-price weighted index in contrast to the market valuation weightings used by the more closely followed S&P 500.

While Apple's $736 billion (€678 billion) market valuation makes it the largest member within the S&P 500, and therefore exerts more influence on the index than any other constituent, it will enter the Dow in fifth position behind Goldman Sachs, 3M, IBM and Boeing, which all have share prices that trade above $150 apiece.

Without AT&T, Verizon will remain the only telecommunications company within the 30 companies that make up the Dow Jones Industrial Average.

Apple has outpaced both the S&P 500 and Dow this year, rising 15 per cent in less than three months after reporting a record $18 billion quarterly profit in January.

Analysts on Wall Street have been steadily increasing share forecasts, with the highest target set at $165.

“The Dow is supposed to be the dominant companies in each different sector of the economy and I don’t think anybody can argue that Apple isn’t by far the dominator in the phone sector,” said Michael Chadwick, a fund manager at Chadwick Financial Advisors in Connecticut.

“The digital age is taking over. It’s going to be a function of those who can adapt and change.”

Apple shares climbed on the news, while AT&T shares fell.

– (Copyright The Financial Times Ltd 2015/Bloomberg)