Two stocks in the Dow Jones Industrial Average will be replaced, Dow Jones & Co. announced.
The Travelers Companies, Inc. (TRV) is taking the place of Citigroup, Inc. (C) and Cisco Systems, Inc. (CSCO) is going in for General Motors Corp. (GM).
Both changes will be effective with the opening of trading on June 8, 2009.
“The parlous state of GM has left us with no choice but to remove it from The Dow. A bankruptcy filing immediately disqualifies a stock regardless of a company’s history or its role as a cultural icon,” said Robert Thomson, managing editor of The Wall Street Journal and editor-in-chief for all of Dow Jones.
He said the addition of Travelers to the index helps restore financial industry representation that was lost when American International Group, Inc. (AIG) was removed.
“The selection of Travelers, a property and casualty insurance company, is intended to restore the financials industry to full representation in The Dow,” Thomson said. “When we removed American International Group, Inc. last fall, we substituted Kraft Foods, Inc. rather than another financial stock because the financials industry was then in great upheaval. That choice left financials underrepresented in The Dow, a deficiency we are now correcting.”
He said Dow Jones was “reluctant to remove Citigroup at the height of the financial frenzy, but it is clear that the bank is in the midst of a substantial restructuring which will see the government with a large and ongoing stake.”
He suggested Citi would be reconsidered in the future “once the bank has refashioned itself.”
Thomson said that Cisco is a fitting addition “because its communications and computer-networking products are vital to an economy and culture still adapting to the Information Age — just as automobiles were essential to America in the 20th Century.”
The Journal’s Managing Editor oversees the makeup of The Dow, which Charles H. Dow created as a 12-stock index in May 1896.
GM ends an 83-year run as a component of the index. Citigroup joined the Dow on March 17, 1997, as Citicorp. Ironically, Travelers merged with Citicorp to form Citigroup in 1998, creating what was then termed a “financial supermarket.” Citigroup spun off Travelers in 2002.
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