Dow index to replace AIG with Kraft
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- September
- 18
The makeup of the Dow Jones Industrial Average will soon change in the aftermath of the credit crisis that has pushed shares of financial companies sharply lower.
American International Group Inc., the insurance giant whose shares are down more than 80 percent this week, will be replaced in the Dow index by Kraft Foods Inc., the world’s second largest food company. The Dow, an index of 30 blue-chip stocks, is the best known barometer that tracks the U.S. stock market.
The change will be effective Sept. 22.
“We are adding Kraft because the Dow Jones Industrial Average had no representation in food products,†Robert Thomson, managing editor of The Wall Street Journal, said in a written statement.
The Journal’s news editors oversee the makeup of The Dow.
Kraft, based in Northfield, Illinois, makes dozens of well known food products, including Oreo cookies, Ritz crackers and Oscar Mayer hot dogs. Kraft employs about 600 workers in Tarrytown. Most work in research and development and the beverage unit that oversees such brands as Maxwell House, Country Time, Kool-Aid and Crystal Light.
The Dow dates to May 1896 when Wall Street Journal co-founder Charles H. Dow created a 12-stock index to track the key engines of the U.S. economy. Over the years, the Dow has kicked out laggard stocks after they suffered steep declines or no longer represented a changing economy.
AIG became a member of the Dow in April 2004 along with Verizon Communications Inc. and Pfizer Inc. At the time, those stocks replaced AT&T Inc., International Paper Co. and Eastman Kodak Co.
The Dow is down about 20 percent this year with financial shares like AIG suffering some of the biggest losses. With the credit crisis showing few signs of ending, the Dow opted against adding another financial stock for now.
“We realize this decision leaves the Dow Jones Industrial Average under-weighted in financials, and we will address this situation in due course,†Thomson said.
This entry was posted
on Thursday, September 18th, 2008 at 2:25 pm by Jay Loomis.
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