The Domino Effect - Apple Stock Split Brings DJIA Shuffle

What you need to know before the US markets open 🇺🇸

Hey Global Investor, here's what you need to know before the US markets open.

Market Snapshot 📈

S&P 500 (Monday Close) 3,431.28 +34.12 (1.00%)

NASDAQ (Monday Close) 11,379.72 +67.92 (0.60%)

FTSE 100 (5 PM IST) 6114.68 +9.95 (+0.16%)

NIFTY 50 (Today's Close) 11,472.25 +5.80 (0.051%)

USDINR (5 PM IST) 74.22 (1 Year +3.71%)

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The Dow Shuffle – Apple’s Stock Split Brings About Major Changes

On Monday, the S&P Dow Jones Indices announced a significant recast of the Dow Jones Industrial Average. The Dow is switching out Exxon Mobil, Pfizer, and Raytheon, and replacing them with Salesforce, Amgen, and Honeywell, the first three-stock change since 2013.

What Happened? The Dow is price-weighted, meaning stocks with higher share prices are given greater weightage. Apple’s announcement of the 4-for-1 stock split meant the 30-stock benchmark’s exposure to technology was lowered from 27.6% to 20.3%. To bring the DJIA’s tech weight back into range, Exxon Mobil will make way for cloud-based CRM giant Salesforce.com. At the same time, biopharma company Amgen will replace pharma giant Pfizer; industrial conglomerate Honeywell will take the place of defense contractor Raytheon Technologies.

This recast will help diversify the 124-year old index by eliminating overlap between companies of similar scope; in many ways, the index will be a better reflection of the American economy.

Stock splits within DJIA are rare. The last was Nike’s 2-for-1 split in 2015, with Apple being just the 18th since 1999. [As an aside, Apple has single-handedly lifted Dow by 1400 points in 2020].

The recast is effective August 31st with UnitedHealth Group, Home Depot, and Amgen taking the top three spots. Apple drops to 17th from the top spot

Market Reaction: After-hours, Salesforce shares rose 3.8%, while Exxon Mobil shares retreated 1.6%. Amgen rallied 4%, while Pfizer shed 1.6%; and Honeywell rose 3.7%, while Raytheon dropped 3%.

The DJIA closed 1.35% higher at 28,308.46, just 4% shy of its all-time high of 29,568.57 which was recorded on February 12, 2020.

Snapshot 📈

CRM $208.46 +0.93 (+0.45%)

AMGN $235.57 -2.07 (-0.87%)

HON $159.37 +1.87 (+1.19%)

DJI 28,308.46 +378.13 (+1.35%)

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Newsworthy 📰

• Great Timing: Unity’s IPO filing shows how big a threat it poses to Epic and the Unreal Engine 

• Helping Hand: General Atlantic, Sequoia Capital pushing Oracle’s bid for TikTok (ORCL +1.48%)

• Sooner than Expected: Amazon Go’s cashierless tech may come to Whole Foods as soon as next year (AMZN +0.69%)

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Later Today 🕒

• 6:30 PM IST: Case-Shiller national home price index (year-over-year)

• 7:30 PM IST: Consumer confidence index

• 7:30 PM IST: New home sales (SAAR)

• 9.00 PM IST: Richmond Fed President Tom Barkin speaks

• After Market Close: Intuit Inc Earnings

• After Market Close: Salesforce Inc. Earnings

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Fun Fact of The Day 🌞

Bill Gates wanted to call Windows as Interface Manager

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