The oil major Chevron and Bank of America, the US giant that bought ABN Amro's LaSalle business over the protestations of Royal Bank of Scotland last year, will become the newest members of the Dow Jones Industrial Average this month in the first shake-up of the benchmark US
index in nearly four years.
John Prestbo, the editor of Dow Jones Indexes, said the changes to the world's oldest industrial index came after a restructuring at Altria, the tobacco giant formerly known as Philip Morris, led to a review of its component members.
As of next Tuesday, Altria, which last year spun off its Kraft Foods unit and which will next month divest its foreign tobacco operation, and Honeywell International, the industrial conglomerate, will drop out of the index. In their place will be Chevron and BofA. Prestbo said that since World War II, changes to the 30-member index have occurred at an average of about every two years.
He said that BofA was chosen because the index was still underweight on financials and that the company's focus on retail banking, as opposed to investment banking and trading, gave it a "different dimension" to other financial members such as Citigroup and American Express.
The ascension of Chevron will mark its third stint on the index.
Critics point out that 30 members are far too few to be a useful reflection of an economy that has grown and changed so significantly since it was first created. The index has also been criticised because determining membership is a little understood process that is the ultimate decision of the managing editor of the Wall Street Journal.
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