Since 1928, Exxon Mobil (Exxon Mobil) has been in the Dow Jones index in some form, but now its term as the "longest serving" Dow component stock is coming to an end.
On Monday, local time, S&P Dow Jones Indices (S&P Dow Jones Indices) announced the largest adjustment in seven years. Customer relationship management software service provider Salesforce, biopharmaceutical companies Amgen and Honeywell will join the Dow Jones Indices since August. Effective on the 31st, replacing Exxon Mobil, Pfizer and Raytheon Technologies respectively.
As a global energy giant, ExxonMobil has been added to the Dow Jones Industrial Average since 1928. It is the oldest existing constituent stock in the index after General Electric was removed from the Dow in 2018. According to market data, ExxonMobil’s market value reached a peak of more than US$525 billion in October 2007. It was the largest listed company in the United States by market capitalization until 2011, but it was surpassed by Apple in 2012 and has since been more and more. Technology stocks "surpass".
Exxon Mobil said in a statement: "This change will not affect our business, nor will it affect the long-term fundamentals that underpin our strategy. Our investment portfolio is the strongest in more than two decades. It is still creating shareholder value by responsibly meeting the world's energy needs."
Investment bank Raymond James said that ExxonMobil’s exit is a “sign of the times” because the company and the energy industry as a whole are now faltering. This weakness has become more pronounced as the strength of technology companies has increased.
Energy stocks now account for only 2.5% of the S&P 500 index weight, compared with 6.84% five years ago and 10.89% ten years ago. At the same time, the weight of technology stocks in the index has jumped from 18.48% in 2010 to 28.17% today.
Jennifer Rowland of Edward Jones pointed out that the market capitalization of the five technology stocks, Apple, Microsoft, Amazon, Alphabet, and Facebook, each surpasses the entire U.S. energy sector. She called this “quite thought-provoking” and symbolized the huge decline in the energy sector in the past few years.
Pavel Molchanov of Raymond James wrote in a report to clients: "Excluding Exxon Mobil from the Dow, the index provider is clearly making The reaction actually exacerbated investors’ extreme negative sentiment towards almost any oil and gas-related."
He added: “This not only represents the general background of oil prices that are obviously affected by the epidemic, but also the worry that oil demand will eventually peak (this actually appeared before the epidemic), and the ESG-related impact on fossil fuels. Generally opposed."
Having said that, Raymond James remains optimistic about the industry and envisions a recovery in the industry in 2021.
