In the most drastic alteration in its history, the Dow Jones Industrial Average dropped four of its thirty held stocks. The changes will go into effect when the market opens today.
Goodyear Tire, Sears Roebuck, Union Carbide and Chevron will be dropped and replaced by Microsoft, Intel, SBC Communications, and Home Depot.
"The Dow has been known as such a reliable instrument of measurement that people's confidence in tech stocks will be increased," second-year College student Barkha Patel said.
Initiated in 1896, the Dow is an index of thirty "blue chip" stocks, or companies whose securities have a long history of sustained earnings and dividend payments. It is one of the best-known market indicators in the world.
The restructuring also marks the first time in history that stocks included in the NASDAQ stock exchange will be included in the Dow.
"I think [the changes] were long overdue," Commerce Prof. Patrick Dennis said.
"Technology has been a major part of our lives in the past decade," Dennis said.
Previously, the only two technology stocks that belonged to the index were Hewlett-Packard and International Business Machines.
While Chevron was removed from the group of energy companies in the Dow, similar corporations like Exxon remain in the index.
"Maintaining Exxon in the Dow was a positive move," Dennis said, acknowledging Exxon's plans to merge with Mobil.
Sears' removal from the Dow may seem shocking, as it had been in the index for 75 years. The company, which is second only to Wal-Mart in retail sales in the U.S., is going downhill according to Dennis.
"They don't understand the customer's needs," he said.
He added that some of the Sears stores are "deteriorating" and that their products are overpriced.
"It was good to replace Sears with Home Depot," Dennis said.
The new Dow index reflects our changing economy "now much more than before," he said.
Wolfy Joffe, fourth-year College student and McIntire Investment Institute president, said the Dow's changes could cause increased market instability.
Volatility "is one of the biggest side-effects that I'm anticipating. I'm sure others are wary of it as well," Joffe said.
Jay Lasus, fourth-year College student and McIntire Investment Institute chief information officer, said the changes show "that the economy is becoming more tech-oriented, as opposed to manufacturing-oriented."
However, Dennis said he believes the Dow 30 should actually be expanded to serve as a more accurate barometer of the economy.
He added that the Dow has consisted of thirty stocks for so long that now it is "almost an institution."
Dennis also said even though the Dow is a fairly accurate market indicator, investors also need to research a company's performance before purchasing stocks and bonds.
Investors "still have to take not only the Dow into consideration," he said. "But the savvy investor welcomes [these new] changes with open arms -- [they] reinforce his ability to make an investment"
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