The Dow Jones Industrial Average will have to make at least one change to the venerable index next week, and there's a very good chance it will make two more as well.
The S&P Dow Jones Indices will have to adjust to the Dow DJIA on February 26, which is the day Walmart Inc.'s WMT conference is held.
The three-for-one stock split takes effect. Before Walmart's stock split, the company, which reported fourth-quarter earnings on Tuesday, was the 17th-largest component of the Dow Jones Index.
The split would cut Walmart's stock price by two-thirds. Because the Dow Jones is a price-weighted index — meaning that stocks with high prices have a greater impact on the price of the index than those with low prices — both Walmart and the consumer staples sector of which Walmart is a part will have a much smaller impact on the price of the index. . Dow price.
In contrast, the S&P 500 SPX is market capitalization weighted, meaning that a company's market capitalization determines the stock's impact on the index price.
When the Walmart stock split becomes effective after the Feb. 26 open, the “divisor,” or number by which the stock price change is divided, must also change to determine the impact on the Dow Jones index price. The current divisor is 0.15172752595384.
is reading: Why you can count on the Dow to make changes in February
The last time the Dow Jones divisor changed was on August 31, 2020, when Apple Inc.'s AAPL.
A four-for-one split came into effect.
One week before the Apple split took effect, Dow Jones announced three more changes to index members, to compensate for the decline in Apple's influence and to “diversify” the index in order to “better reflect the US economy.”
As of January 31, the consumer staples sector's weight was 7% in the Dow Jones and 6.1% in the S&P 500, so a diminished representation of this sector combined with a decline in Walmart's stock price would not put the weights outside the scope of the analysis. whack.
Read also: This is where Walmart stock will rank in the Dow Jones Index after a 3-for-1 stock split
Dow Jones conservatives have been known to remain tight-lipped about whether, when and what kind of changes are possible. But these are the sectors with the largest differences in weights between the Dow Jones and the S&P 500 as of January 31 (the Dow does not include transportation companies or utilities and does not currently include any REITs):
Information Technology XLK had a weighting of 19.7% in the Dow Jones and 29.5% in the S&P 500. Some of the largest components of the IT sector by market cap that are not in the Dow Jones are Nvidia Corp. NVDA,
Broadcom AVGO,
And Oracle Corporation ORCL,
The XLF financials sector had a weight of 21.5% in the Dow Jones and 13.1% in the S&P 500. The current financial components of the Dow Jones are Goldman Sachs Group Inc. GS,
visa inc v,
TRV Travelers Company,
JPMorgan Chase & Co. JPM,
American Express AXP,
Warren Buffett's Berkshire Hathaway BRK.B,
It is the financial stock with the largest market capitalization, worth $885.2 billion, and is not included in the Dow Jones Index.
The Communications Services sector Google,
Google,
Meta Platforms Inc. Meta,
And Netflix NFLX,
