Amazon is getting added to the Dow. What it means for the market benchmark

Published Wed, Feb 21 20245:08 PM ESTUpdated Wed, Feb 21 20245:22 PM EST

The Dow Jones Industrial Average could get a boost after online giant Amazon joins its ranks. Since 1896, the blue-chip index has made few changes to its 30-stock lineup, having altered its constituents about 60 times in its roughly 128-year history. But a slew of changes is coming next Monday. The Dow is adding Amazon, while removing Walgreens Boots Alliance. Meanwhile, Walmart is about to get a 3-for-1 stock split on the same day. The changes are expected to buoy the price-weighted index. Amazon, which trades at roughly $170 per share, will be the 17th most-weighted stock in the index. Walgreens Boots Alliance , which was trading at around $22 per share, was the smallest weighting in the benchmark. With the change, S & P Dow Jones Indices senior index analyst Howard Silverblatt said the Dow could rally all the way to 42,865. That's about 11% above Tuesday's close. "When you do make a change, it's material," Silverblatt said. .DJI YTD mountain Dow Industrials in 2024. The effect on incoming and outgoing members of the Dow is less clear. According to past data from Ned Davis Research, stocks that leave the Dow have historically outperformed incoming members. Since 1972, outgoing members have averaged a 12-month gain of nearly 17.5%, while new members have averaged a 10% gain in their first year. But Silverblatt said the impact for both incoming and outgoing stocks is less meaningful given how few institutional investors are indexed to the Dow, as compared to the S & P 500. Silverblatt expects new issues such as Amazon earning bragging rights more than anything else from the inclusion, and possibly more interest from single stock buyers buying into a blue-chip name. "You do get a tailwind," Silverblatt said. "But you get a lot more public relations, a lot more acceptance: 'I am one of these now.'" Amazon shares have outperformed this year on hopes artificial intelligence will continue to boost the stock. It's up more than 10% this year. In contrast, Silverblatt expects that removal of Walgreens Boots Alliance from the Dow will further hurt the stock, which is already down more than 16% this year. It lost more than 2% on Wednesday.