"I think these moves make a lot of sense. They bring the Dow closer to the reality of the new economy, not the memory of the old economy," the "Mad Money" host said. Subscribe to CNBC PRO for access to investor and analyst insights:
The due changes to the Dow Jones Industrial Average will make the index more in tune with the new economy, CNBC’s Jim Cramer said Tuesday.
The 30-stock index, which is managed by S&P Dow Jones Indices, is set to swap three components at the end of the month, motivated by a stock split planned by the most influential company on the list.
The moves will further a much-needed modernization of the blue-chip average, he said.
“This rebalancing came about because of a need for more technology in this index, given how big the tech sector’s become,” the “Mad Money” host said. “I think that the job’s almost done.”
The S&P Dow Jones Indices announced Monday that oil giant Exxon, drugmaker Pfizer and defense contractor Raytheon will be dropped from the Dow index. In their places will go cloud subscription software maker Salesforce, biotech firm Amgen and conglomerate Honeywell, respectively.
The shakeup was spurred by Apple’s forthcoming 4-for-1 stock split, which will go into effect Monday. The split will reduce the tech giant’s top ranking on the price-weighted average, thus diminishing the index’s exposure to the information technology sector.
S&P Dow Jones Indices announced that the shuffle, the first swap since Walgreens was added in 2018, will “help diversify the index,” cut back on overlap on the index and include businesses that “better reflect the American economy.”
The Dow Jones slipped 0.21%, or 60 points, to 28,248.44 during the trading day. The benchmark S&P 500 index moved 0.36% to 3,443.62, and the tech-heavy Nasdaq Composite moved 0.76% to 11,466.47, both reaching fresh highs.
“These changes had an enormous impact on today’s action,” Cramer said, adding, “I think these moves make a lot of sense. They bring the Dow closer to the reality of the new economy, not the memory of the old economy.”
Cramer made the following comments on each addition:
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