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Exxon, Pfizer, Raytheon exiting Dow in major shake-up

Yahoo Finances Ines Ferre joins the On the Move panel to discuss the changes in The Dow Jones Industrial Average.

Video Transcript

JULIE HYMAN: Big changes in the Dow Jones Industrial Average, because we are seeing Exxon being set to be removed from the index and Salesforce coming in. Ines Ferre is with us to explain to us. And all of this was trickled by-- triggered by Apple's split, right?

INES FERRE: Yeah, that's right. That's because the Dow is a price-weighted index. So Apple's split really triggers this. And Salesforce coming in and the place of Exxon Mobil will really help the Dow boost its exposure to information technology. So there's definitely a rebalancing issue going on here.

And as far as some of these stocks, just take a look right now. I've got the stocks of Salesforce, Amgen, Honeywell. These are the three components that will be going in on August 31. They are all squarely trading above anywhere between $150 and $200 a share.

Amgen is seen as a mature biotech company. It will be replacing Pfizer. And Honeywell is-- actually, Honeywell is homecoming, sort of, so to speak, for Honeywell, because it had been a Dow component before. It had been taken out back in 2008.

But certainly, the replacement of Salesforce with Exxon Mobil kind of showing you a sign of the times, changing times. Exxon Mobil had been the longest serving component of the Dow since back in 1928, when it was still known as Standard Oil of New Jersey. You can see the stock right now is down about 3%. Compare it to Chevron. A lot of analysts are saying, well, Exxon Mobil is the worst of them. So Chevron is the better of the energy companies.

But really, this shows you in with the cloud, in with technology, out with energy. And if you look at the Dow, that's down more than 1% year-to-date. The S&P is up about 6% year-to-date. The NASDAQ is up 26%.

So the Dow really hasn't been able to benefit from these big tech companies that have really taken the broader markets higher, that have taken the markets higher. So this will be a significant change for a reshuffling for the Dow.

JULIE HYMAN: Ines, thank you very much.