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The Short Answer

What Is the Dow Jones Industrial Average?

Recent membership changes highlight confusion around the famous index.

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The Dow Jones Industrial Average, also known as the “Dow,” shook up its constituents earlier this week. Cloud computing and software provider Salesforce.com (CRM) replaced oil giant Exxon Mobil (XOM). Biotech leader Amgen (AMGN) took the place of drug manufacturer Pfizer (PFE). Honeywell (HON), an industrial manufacturer, replaced Raytheon Technologies (RTX), a defense contractor.

These changes come after Apple’s (AAPL) 4-for-1 stock split, which dropped Apple’s share price by 75%. Because the Dow is a price-weighted index (we’ll discuss this below), Apple, after its stock split, has less weight in the index. To maintain the technology sector weighting, the Dow had to make some adjustments.

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Sachin Nagarajan does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.