The Dow Jones Industrial average - the best-known barometer of trading on the New York Stock Exchange - is being revised for the first time in 20 years, Dow Jones & Co. announced today.
The change will return International Business Machines Corp. to the roster of 30 corporations that compose the index after a lapse of 50 years and the addition of one other, Merck & Co. That firm produces pharmaceuticals and other health care products.
Chrysler Corp. and Esmark Inc., a diversified company in the food industry will be deleted to make room for them.
The change takes effect Friday and marks the first time June 1959 that the companies have been changed to update the index. At that time four stocks were deleted and four more added.
"The change in the roster . . .aims to improve the index as an indicator of the general price movement of shares on the New York Stock Exchange. IBM and Merck will help reflect the importance of techology and pharmaceuticals in the nation's ecnonomy and in the stock market," according to a report in the Wall Street Journal, which is owned by Dow Jones & Co.
IBM, which now ranks as the seventh largest company in the nation by sales, was first included among the 30 stocks 1932 but deleted in 1939 to make room for American Telephone & telegraph.
Although Chrysler, the smallest of the U.S. automakers, has been deleted, general Motors will continue to represent the auto industry, several companies, including General foods Corp., American Brands Corp. and Procter & Gamble Co., are represented in the industrial index.
The substitution of two new companies in the index will require a revision in the divisors used to calculate the Dow industrial average to maintain a continuity in the index. The same is true of the Dow 65-stock composite average, which includes the 30 industrials plus 20 transportation issues and 15 utilities.
The divisor is the number used instead of 30 to divide the total price of stocks in the list to arrive at the averages. Because of stock splits over the years, the current divisor in now 1,443.
Dow Jones said it would calculate the new divisor on the basis of Thursday's closing NYSE stock prices.
With the substitutions, these companies will be included in the dow industrial index: Allied chemical; Aluminum Co.; American Brands; American Can; American Telephone & Telegraph; Bethlehem Steel; DuPont; Eastman Kodak; Exxon; General Electric General Foods; General Motors; Goodyear; Inco; IBM; International Harvester; International Paper; Johns-Manville; Merck; Minnesota Mining and Manufacturing; Owens-Illinois; Procter & Gamble; Sears Roebuck; Standard Oil of California; Texaco; Union Carbide; United Technologies; U.S. Steel; Westinghouse Electric; and F.W. Woolworth.
Dow Jones said it would revise the index by using this procedure:
At the close of NYSE trading today, the stock prices of all issues in the current list would be totaled then divided by 1,443, which will produce the industrial average for Thursday's trading. The prices of Esmark and Chrysler will be subtracted from the total and the prices of IBM and Merck added in.