Cloud-based software provider salesforce.com (NYSE: CRM) has joined the ranks of what many consider to be the most influential and exclusive stock index of them all: the Dow Jones Industrial Average (DJIA, or simply “the Dow”). On Monday, S&P Dow Jones Indices — the company that manages the Dow — announced after market close that Salesforce will become one of its 30 components prior to the start of trading on Monday, Aug. 31.
With its graduation, the veteran cloud computing company displaces oil and gas giant ExxonMobil. This is one of three changes to the DJIA. The other two are biotech Amgen (NASDAQ: AMGN) supplanting pharmaceutical peer Pfizer and engineering conglomerate Honeywell International (NYSE: HON) replacing Raytheon Technologies.
The changes are due to Apple’s (NASDAQ: AAPL) recent 4-for-1 stock split. As S&P Dow Jones Indices explained in its announcement, its actions “will reduce the index’s weight in the Global Industry Classification Standard (GICS) Information Technology sector. The announced changes help offset that reduction.”
“They also help diversify the index by removing overlap between companies of similar scope and adding new types of businesses that better reflect the American economy,” the Dow’s manager added.
Often seen as a bellwether or proxy for the broader stock market, the DJIA consists of some of the most well-known blue chips actively traded among investors. Its components are sizable. Salesforce, for example, boasts a market capitalization of nearly $188 billion.
Salesforce has not yet commented on its inclusion in the index. In after-hours trading Monday following the release of the news, investors bid the stock up by just over 3%. During the regular trading day, it had risen by nearly 0.5%.
In addition, The Dow Jones climbed on Monday, as drug stocks climbed after President Donald Trump signaled an aggressive stance to push COVID-19 medical treatments to return the economy closer to normalcy.
Futures on the Dow Jones Industrial Average YM00, 0.74% rose 216 points.
After Trump accused the Food and Drug Administration of trying to sabotage his re-election efforts, the FDA gave emergency approval for the use of blood plasma from recovered coronavirus patients, which hasn’t been proved by scientific trials. The Financial Times said Trump may order the FDA to grant approval to the University of Oxford vaccine to be distributed by AstraZeneca in the same manner.
“The drug in question still has a long way to go in terms of development, but the bulls have jumped on the story. Keep in mind that stocks were coming from a low base as markets fell on Friday on the back of the largely disappointing manufacturing and services data from France and Germany,” said David Madden, market analyst at CMC Markets U.K.
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