NEW YORK - Bank of America Corp. and Chevron Corp. will replace tobacco company Altria Group Inc. and manufacturer Honeywell International Inc. in the Dow Jones industrial average, giving the stock market's best-known indicator bigger slices of the banking and energy sectors.
The changes to the index, which since 1928 has comprised 30 stocks, reflects changes at Altria, better known by its former name, Phillip Morris Cos. The maker of Marlboro cigarettes last year spun off its Kraft Foods Inc. division after earlier selling most of its Miller Brewing unit, and it will soon corral its international tobacco operations into a separate company.
The blue chip index's parent, Dow Jones & Co., said the slimmed down Altria will be too small and narrowly focused to warrant inclusion in the Dow. Phillip Morris became part of the index in 1985.
While Altria's makeover prompted the decision to alter the index for the first time since 2004, Dow Jones also reviewed the other 29 components. Dow Jones is publisher of The Wall Street Journal and the newspaper's top editor decides on changes to the 111-year-old index. The decision to bump Honeywell from the lineup comes amid a rise in the importance of the banking and energy businesses.
Bank of America, based in Charlotte, N.C., is the nation's biggest bank by deposits. The banking sector has taken on a larger role in the overall economy in the last 10 to 20 years, said John A. Prestbo, editor of Dow Jones Indexes.
Prestbo, speaking on a conference call reviewing the changes, said the bank's consumer business gives the Dow better representation of an important aspect of the banking sector. Other financial names like American Express Co., Citigroup Inc. and JP Morgan Chase & Co. and are already part of the index.
Chevron, the energy company based in San Ramon, Calif., joins rival Exxon Mobil Corp. as a Dow component. Chevron had been part of the Dow twice before. The company, then known as Standard Oil Co. of California, had a brief stint in the mid-1920s before what would become Chevron had a long run as a Dow stock from 1930 until 1999.
Honeywell, which has assorted manufacturing operations, is the smallest company in the index by revenue and earnings. Industrial companies are now less important to the stock market than in 1925 when a predecessor company of Honeywell, Allied Chemical & Dye Corp., became part of the Dow.
The changes, which occur Feb. 19, are the first since April 2004 when the index added insurer American International Group Inc., drug maker Pfizer Inc. and telecommunications company Verizon Communications in place of what was then AT&T Corp., Eastman Kodak Co. and International Paper Co. The AT&T name has since resurfaced in the Dow through phone-company mergers.
Substitutions to the Dow don't come often. Since World War II, they have taken place on average more than every two years.
"We try to change the Dow as seldom as possible," said Prestbo. "We think that a lot of the Dow's integrity is that the stocks aren't moving through a revolving door all the time."
Still, the only one Dow component has been around since the index began with a dozen names in 1896: General Electric Co.
Dow Jones plans to tweak the formula it uses to calculate the Dow so that the substitutions won't change the value of the index, which is based on the stock prices of its components. As of Sept. 30, about $53 billion in investments used the Dow industrials as a benchmark. However, as the stock market's most well-known index, many investors equate the moves of the Dow as a barometer of the overall stock market. Many professional investors, however, also look to the Standard & Poor's 500 index for a snapshot of conditions on Wall Street.
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