ExxonMobil has been removed from the Dow Jones Industrial Average with some analysts calling it a “sign of the times” as the energy giant ends its 92-year ride on the DJIA.
The exit marks an extremely significant event for the Dow Jones’ longest-serving member of the index, which, according to a report from NPR is often referred to as “shorthand for the stock market.”
Exxon, alongside pharmaceutical giant Pfizer and defense contractor Raytheon Technologies were ousted from the Dow’s Industrial Average, making way for Salesforce, Amgen and manufacturer Honeywell.
Exxon has been a proud member of the Dow Jones Industrial Average since 1928, but has been hit hard by the pandemic’s drop in energy usage globally, leaving competitor Chevron as the last energy company remaining on the Dow’s average.
S&P Dow Jones Indices has released a statement saying that due to Apple’s stock split, “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,” they added.
Analysts have also noted that “the change is driven by Apple’s decision to split its stock, according to S&P Dow Jones Indices, which is responsible for the Dow. Its impact on Exxon will be more symbolic than substantive.”
A spokesperson for Exxon has said that “this action does not affect our business nor the long-term fundamentals that support our strategy.”
“Our portfolio is the strongest it has been in more than two decades, and our focus remains on creating shareholder value by responsibly meeting the world’s energy needs.”
This, however, has been challenged by analyst Jennifer Rowland who has said that the removal “is symbolic of just how far the energy sector has fallen over the past several years.”
“Going forward, Chevron will be the only energy stock on the DJIA. In the S&P 500, there are 5 stocks – Apple, Microsoft, Amazon, Alphabet and Facebook – that are individually larger than the entire U.S. energy sector- that’s pretty sobering,” Rowland said.
According to analyst Pavel Molchanov with RBC Capital who spoke with Market Watch, “at a time when energy is a mere 2.5% of the S&P 500’s market cap, it seems incongruous that two oil and gas supermajors have been part of the Dow Jones Industrial Average.”
“Well, the powers that be at S&P Dow Jones Indices have finally addressed that anomaly,” he said.